Cover
Cover - shares | 3 Months Ended | |
Mar. 31, 2021 | May 07, 2021 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2021 | |
Document Transition Report | false | |
Entity File Number | 001-37872 | |
Entity Registrant Name | Priority Technology Holdings, Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 47-4257046 | |
Entity Address, Address Line One | 2001 Westside Parkway | |
Entity Address, Address Line Two | Suite 155 | |
Entity Address, City or Town | Alpharetta, | |
Entity Address, State or Province | GA | |
Entity Address, Postal Zip Code | 30004 | |
City Area Code | (800) | |
Local Phone Number | 935-5964 | |
Title of 12(b) Security | Common stock, par value $0.001 | |
Trading Symbol | PRTH | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding (in shares) | 67,651,898 | |
Entity Central Index Key | 0001653558 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2021 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Current assets: | ||
Cash | $ 5,827 | $ 9,241 |
Restricted cash | 58,933 | 78,879 |
Accounts receivable, net of allowance of $374 and $574 | 50,886 | 41,321 |
Prepaid expenses and other current assets | 4,083 | 3,500 |
Current portion of notes receivable, net of allowance of $467 and $467 | 1,829 | 2,190 |
Settlement assets | 1,220 | 753 |
Total current assets | 122,778 | 135,884 |
Notes receivable, less current portion | 5,084 | 5,527 |
Property, equipment, and software, net | 23,791 | 22,875 |
Goodwill | 106,832 | 106,832 |
Intangible assets, net | 91,062 | 98,057 |
Deferred income taxes, net | 48,996 | 46,697 |
Other non-current assets | 1,949 | 1,957 |
Total assets | 400,492 | 417,829 |
Current liabilities: | ||
Accounts payable and accrued expenses | 29,880 | 29,821 |
Accrued residual commissions | 30,300 | 23,824 |
Customer deposits and advance payments | 5,488 | 2,883 |
Current portion of long-term debt | 24,302 | 19,442 |
Settlement obligations | 50,820 | 72,878 |
Total current liabilities | 140,790 | 148,848 |
Long-term debt, net of current portion, discounts and debt issuance costs | 350,667 | 357,873 |
Other non-current liabilities | 8,790 | 9,672 |
Total long-term liabilities | 359,457 | 367,545 |
Total liabilities | 500,247 | 516,393 |
Stockholders' deficit: | ||
Preferred stock - $0.001 par value per share; 100,000,000 shares authorized; zero issued or outstanding | 0 | 0 |
Common stock - $0.001 par value per share; 1,000,000,000 shares authorized; 68,091,398 and 67,842,204 shares issued, respectively; 67,640,174 and 67,390,980 shares outstanding, respectively | 68 | 68 |
Additional paid-in capital | 7,257 | 5,769 |
Treasury stock, 451,224 common shares, at cost | (2,388) | (2,388) |
Accumulated deficit | (104,692) | (102,013) |
Total stockholders' deficit | (99,755) | (98,564) |
Total liabilities and stockholders' deficit | $ 400,492 | $ 417,829 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Current assets: | ||
Accounts receivable allowance for credit loss | $ 374 | $ 574 |
Notes receivable allowance for credit loss | $ 467 | $ 467 |
Stockholders' deficit: | ||
Preferred stock par value (USD per share) | $ 0.001 | $ 0.001 |
Preferred stock authorized (in shares) | 100,000,000 | 100,000,000 |
Preferred stock issued (in shares) | 0 | 0 |
Preferred stock, outstanding (in shares) | 0 | 0 |
Common stock par value (USD per share) | $ 0.001 | $ 0.001 |
Common stock, authorized (in shares) | 1,000,000,000 | 1,000,000,000 |
Common stock issued (in shares) | 68,091,398 | 67,842,204 |
Common stock outstanding (in shares) | 67,640,174 | 67,390,980 |
Treasury stock (in shares) | 451,224 | 451,224 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
REVENUES | ||
REVENUES | $ 113,297 | $ 96,933 |
OPERATING EXPENSES: | ||
Costs of services | 81,863 | 66,364 |
Salary and employee benefits | 9,548 | 10,129 |
Depreciation and amortization | 9,070 | 10,272 |
Selling, general and administrative | 8,289 | 6,609 |
Total operating expenses | 108,770 | 93,374 |
Income from operations | 4,527 | 3,559 |
OTHER EXPENSES: | ||
Interest expense | (9,168) | (10,315) |
Other expenses, net | (269) | (346) |
Total other expenses, net | (9,437) | (10,661) |
Loss before income taxes | (4,910) | (7,102) |
Income tax benefit | (2,231) | (1,233) |
Net loss | $ (2,679) | $ (5,869) |
Loss per common share: | ||
Basic and Diluted (USD per Share) | $ (0.04) | $ (0.09) |
Weighted-average common shares outstanding: | ||
Basic and Diluted (in shares) | 67,543 | 67,061 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Cash flows from operating activities: | ||
Net loss | $ (2,679) | $ (5,869) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization of assets | 9,070 | 10,272 |
Equity-classified and liability-classified stock-based compensation | 558 | 338 |
Amortization of debt issuance costs and discounts | 590 | 460 |
Deferred income tax benefit | (1,661) | (1,699) |
Change in allowance for deferred tax assets | (638) | 466 |
Payment-in-kind interest | 1,924 | 1,391 |
Other non-cash items, net | (64) | 208 |
Change in operating assets and liabilities: | ||
Accounts receivable | (9,575) | 631 |
Settlement assets and obligations, net | (22,526) | (7,047) |
Prepaid expenses and other current assets | (583) | 390 |
Notes receivable | 862 | (927) |
Accounts payable and other accrued liabilities | 8,633 | (3,541) |
Customer deposits and advance payments | 2,604 | (1,647) |
Other assets and liabilities, net | 59 | (680) |
Net cash used in operating activities | (13,426) | (7,254) |
Cash flows from investing activities: | ||
Additions to property, equipment, and software | (2,754) | (2,281) |
Acquisitions of intangible assets | (2,937) | (948) |
Net cash used in investing activities | (5,691) | (3,229) |
Cash flows from financing activities: | ||
Repayment of long-term debt | (4,860) | (1,002) |
Debt modification costs paid | 0 | (2,749) |
Borrowings under revolving credit facility | 0 | 3,500 |
Proceeds from exercise of stock options | 617 | 0 |
Net cash used in financing activities | (4,243) | (251) |
Net decrease in cash and restricted cash | (23,360) | (10,734) |
Cash and restricted cash at beginning of period | 88,120 | 50,465 |
Cash and restricted cash at end of period | 64,760 | 39,731 |
Supplemental cash flow information: | ||
Cash paid for interest | 6,553 | 8,186 |
Non-cash investing and financing activities: | ||
Payment-in-kind interest | 1,924 | 1,391 |
Reconciliation of cash and restricted cash: | ||
Total cash and restricted cash | $ 64,760 | $ 39,731 |
BASIS OF PRESENTATION AND SIGNI
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Business, Consolidation, and Presentation Priority Technology Holdings, Inc. and its consolidated subsidiaries are referred to herein collectively as "Priority," "PRTH," the "Company," "we," "our" or "us," unless the context requires otherwise. Priority is a provider of merchant acquiring, integrated payment software and commercial payment solutions. The Company operates on a calendar year ending each December 31 and on four calendar quarters ending on March 31, June 30, September 30, and December 31 of each year. Results of operations reported for interim periods are not necessarily indicative of results for the entire year. These unaudited condensed consolidated financial statements include the accounts of the Company including those of its majority-owned subsidiaries, and all material intercompany balances and transactions have been eliminated in consolidation. These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The consolidated balance sheet as of December 31, 2020 was derived from the audited financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020 but does not include all disclosures required by GAAP for annual financial statements. In the opinion of the Company's management, all known adjustments necessary for a fair presentation of the results of the interim periods have been made. These adjustments consist of normal recurring accruals and estimates that affect the carrying amount of assets and liabilities. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reported period. Actual results could differ materially from those estimates. In particular, the continued magnitude, duration and effects of the COVID-19 pandemic are difficult to predict, and the ultimate effect could result in future charges related to the recoverability of assets, including financial assets, long-lived assets, goodwill, and other losses. Status as an Emerging Growth Company The Company is an "emerging growth company" ("EGC"), as defined in the Jumpstart Our Business Startups Act of 2012. The Company may remain an EGC until December 31, 2021. However, if the Company's non-convertible debt issued within a rolling three-year period exceeds $1.0 billion, the Company would cease to be an EGC immediately, or if its revenue for any fiscal year exceeds $1.07 billion, or the market value of its common stock that is held by non-affiliates exceeds $700.0 million on the last day of the second quarter of any given year, the Company would cease to be an EGC as of the beginning of the following year. As an EGC, the Company is not required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002. Additionally, the Company may continue to elect to delay the adoption of any new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As such, the Company's financial statements may not be comparable to that comply with public company effective dates. Comprehensive Income (Loss) For the three months ended March 31, 2021 and March 31, 2020, the Company had no activities to report as components of other comprehensive income (loss). Therefore, no separate Statement of Comprehensive Income (Loss) was prepared for any reporting period as the Company's net income (loss) from continuing operations comprises all of its comprehensive income (loss). Comparability of Reporting Periods Certain prior period amounts in these unaudited condensed consolidated financial statements have been reclassified to conform to the current period presentation, with no net effect on income from operations, income (loss) before income taxes, net income (loss), stockholders' deficit, or cash flows from operations, investing, or financing activities for any period presented. Accounting Policies and New Accounting Standards Adopted There have been no material changes to the Company's accounting policies as described in its most recent Annual Report on Form 10-K for the year ended December 31, 2020. The Company did not adopt any new accounting standards during the three months ended March 31, 2021 except for the following: Simplifying the Accounting for Income Taxes (ASU 2019-12) In December 2019, the FASB issued Accounting Standards Update ("ASU") 2019-12, Simplifying the Accounting for Income Taxes ("ASU 2019-12"), which is intended to enhance and simplify various aspects of the accounting for income taxes. The amendments in this update remove certain exceptions to the general principles in Accounting Standards Codification ("ASC") Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also clarifies and amends existing guidance to improve consistency in application of the accounting for franchise taxes, enacted changes in tax laws or rates and transactions that result in a step-up in the tax basis of goodwill. The adoption of ASU 2019-12 on January 1, 2021 did not have a material effect on our consolidated financial statements. Recently Issued Accounting Standards Pending Adoption The following standards are pending adoption and will likely apply to the Company in future periods based on the Company's current business activities. Implementation Costs Incurred in Cloud Computing Arrangements (ASU 2018-15) In August 2018, the FASB issued ASU 2018-15, Implementation Costs Incurred in Cloud Computing Arrangements ("ASU 2018-15"), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). As an EGC, this ASU is effective for the Company's annual reporting period beginning January 1, 2021, and will be effective for interim periods beginning in 2022. The amendments are applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption, and the Company has not yet made a determination to use the retrospective or prospective adoption method. Based on current operations of the Company, the adoption of ASU 2018-15 is not expected to have a material effect on the Company's results of operations, financial position, or cash flows. Reference Rate Reform (ASU 2020-04) On March 12, 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financial Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contract at the modification date or reassess a previous accounting determination. ASU 2021-01 ASU 2020-04 can be adopted at any time before December 31, 2022. The provisions of ASU 2020-04 may impact the Company if future debt modifications or refinancings utilize one or more of the reference rates covered by the provisions of this ASU. Leases (ASC 842) In February 2016, the FASB issued new lease accounting guidance in ASU No. 2016-02, Leases-Topic 842 , which has been codified in ASC 842, Leases . Under this new guidance, lessees will be required to recognize for all leases (with the exception of short-term leases): 1) a lease liability equal to the lessee's obligation to make lease payments arising from a lease, measured on a discounted basis and 2) a right-of-use asset which will represent the lessee's right to use, or control the use of, a specified asset for the lease term. As an EGC, this standard is effective for the Company's annual and interim reporting periods beginning 2022. The adoption of ASC 842 will require the Company to recognize non-current assets and liabilities for right-of-use assets and operating lease liabilities on its consolidated balance sheet, but it is not expected to have a material effect on the Company's results of operations or cash flows. ASC 842 will also require additional footnote disclosures to the Company's consolidated financial statements. Credit Losses (ASU 2016-13 and ASU 2018-19) In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . This new guidance will change how entities account for credit impairment for trade and other receivables, as well as for certain financial assets and other instruments. ASU 2016-13 will replace the current "incurred loss" model with an "expected loss" model. Under the "incurred loss" model, a loss (or allowance) is recognized only when an event has occurred (such as a payment delinquency) that causes the entity to believe that a loss is probable (i.e., that it has been "incurred"). Under the "expected loss" model, a loss (or allowance) is recognized upon initial recognition of the asset that reflects all future events that leads to a loss being realized, regardless of whether it is probable that the future event will occur. The "incurred loss" model considers past events and current conditions, while the "expected loss" model includes expectations for the future which have yet to occur. The standard will require entities to record a cumulative-effect adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective. The Company is currently evaluating the potential impact that ASU 2016-13 may have on the timing of recognizing future provisions for expected losses on the Company's accounts receivable and notes receivable. Since the Company is a smaller reporting company ("SRC"), the Company must adopt this new standard no later than the beginning of 2023 for annual and interim reporting periods. Goodwill Impairment Testing (ASU 2017-04) In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment . ASU 2017-04 will eliminate the requirement to calculate the implied fair value of goodwill (i.e., step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit's carrying amount over its fair value (i.e., measure the charge based on the current step 1). Any impairment charge will be limited to the amount of goodwill allocated to an impacted reporting unit. ASU 2017-04 will not change the current guidance for completing Step 1 of the goodwill impairment test, and an entity will still be able to perform the current optional qualitative goodwill impairment assessment before determining whether to proceed to Step 1. Upon adoption, the ASU will be applied prospectively. Since the Company is a SRC, the Company must adopt this new standard no later than the beginning of 2023 for annual and interim reporting periods. The impact that ASU 2017-04 may have on the Company's financial condition or results of operations will depend on the circumstances of any goodwill impairment event that may occur after adoption. |
REVENUES
REVENUES | 3 Months Ended |
Mar. 31, 2021 | |
Revenue from Contract with Customer [Abstract] | |
REVENUES | REVENUESFor all periods presented, substantially all of the Company’s revenues from services were recognized over time. Revenues and commissions earned from the sales of payment equipment were typically recognized at a point in time. The following table presents a disaggregation of the Company's consolidated revenues by type, and the relationships to the Company's reportable segments, for the three months ended March 31, 2021 and March 31, 2020: (in thousands) Three Months Ended March 31, 2021 2020 Revenue Type Merchant card fees $ 107,702 $ 89,086 Outsourced services and other services 4,378 6,791 Equipment 1,217 1,056 Total revenues $ 113,297 $ 96,933 Revenues earned in these disaggregated categories consist of following: • Merchant card fees - revenues related to discount rates and interchange fees earned from payment services provided by the Company's Consumer Payments, Commercial Payments, and Integrated Partners segments. • Outsourced services and other services - business process outsourcing services provided by our Commercial Payments segment primarily to certain business customers of American Express, auxiliary services provided primarily to customers in the Company's Integrated Partners segment, and revenue from automated clearing house ("ACH") services. • Equipment - revenues from sales of point-of-sale equipment and other payment-processing equipment sold to customers in the Company's Consumer Payments segment. Transaction Price Allocated to Future Performance Obligations ASC 606, Revenue Recognition ("ASU 606"), requires disclosure of the aggregate amount of the transaction price allocated to unsatisfied performance obligations. However, as allowed by ASC 606, the Company has elected to exclude from this disclosure any contracts with an original duration of one year or less and any variable consideration that meets specified criteria. The Company’s most significant performance obligations consist of variable consideration under a stand-ready series of distinct days of service. Such variable consideration meets the specified criteria for the disclosure exclusion. Therefore, the majority of the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied is variable consideration that is not required for this disclosure. The aggregate fixed consideration portion of customer contracts with an initial contract duration greater than one year is not material. Contract Costs For new, renewed, or anticipated contracts with customers, the Company does not incur material amounts of incremental costs to obtain such contracts, as those costs are defined by ASC 340-40, Related Costs to Obtain or Fulfill a Contract with Customers ("ASU 340-40"). Fulfillment costs, as defined by ASC 340-40, typically benefit only the period (typically a month in duration) in which they are incurred and therefore are expensed in the period incurred (i.e., not capitalized) unless they meet criteria to be capitalized under other accounting guidance. The Company pays commissions to most of its independent sales organizations ("ISOs"), and for certain ISOs the Company also pays (through a higher commission rate) them to provide customer service and other services directly to our merchant customers. The ISO is typically an independent contractor or agent of the Company. Although certain ISOs may have merchant portability rights, the merchant meets the definition of a customer for the Company even if the ISO has merchant portability rights. Since payments to ISOs are dependent substantially on variable merchant payment volumes generated after the merchant enters into a new or renewed contract, these payments to ISOs are not deemed to be a cost to acquire a new contract since the ISO payments are based on factors that will arise subsequent to the event of obtaining a new or renewed contract. Also, payments to ISOs pertain only to a specific month’s activity. For payments made, or due, to an ISO, the expenses are reported within income from operations on our statements of operations. The Company from time-to-time may elect to buy out all or a portion of an ISO’s rights to receive future commission payments related to certain merchants. Amounts paid to the ISO for these residual buyouts are capitalized by the Company under the accounting guidance for intangible assets. Contract Assets and Contract Liabilities A contract with a customer creates legal rights and obligations. As the Company performs under customer contracts, its right to consideration that is unconditional is considered to be accounts receivable. If the Company’s right to consideration for such performance is contingent upon a future event or satisfaction of additional performance obligations, the amount of revenues recognized in excess of the amount billed to the customer is recognized as a contract asset. Contract liabilities represent consideration received from customers in excess of revenues recognized. Material contract assets and liabilities are presented net at the individual contract level in the consolidated balance sheet and are classified as current or noncurrent based on the nature of the underlying contractual rights and obligations. Supplemental balance sheet information related to contracts from customers as of March 31, 2021 and December 31, 2020 was as follows: (in thousands) Consolidated Balance Sheet Location March 31, 2021 December 31, 2020 Liabilities: Contract liabilities, net (current) Customer deposits and advance payments $1,162 $1,494 The balances for the contract liabilities were approximately $1.7 million and $1.9 million at March 31, 2020 and December 31, 2019, respectively. The changes in the balances during the three months ended March 31, 2021 and March 31, 2020 were due to the timing of advance payments received from the customer. Substantially all of these balances are recognized as revenue within twelve months. Net contract assets were not material for any period presented. Impairment losses recognized on receivables or contract assets arising from the Company's contracts with customers were not material for the three months ended March 31, 2021 and March 31, 2020. |
SETTLEMENT ASSETS AND OBLIGATIO
SETTLEMENT ASSETS AND OBLIGATIONS | 3 Months Ended |
Mar. 31, 2021 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
SETTLEMENT ASSETS AND OBLIGATIONS | SETTLEMENT ASSETS AND OBLIGATIONS Consumer Payments Segment In the Company’s Consumer Payments reportable segment, funds settlement refers to the process of transferring funds for sales and credits between card issuers and merchants. The standards of the card networks restrict non-members, such as the Company, from performing funds settlement or accessing merchant settlement funds. Instead, these funds must be in the possession of a member bank until the merchant is funded. The Company has agreements with member banks which allow the Company to route transactions under the member bank's control to clear transactions through the card networks. Timing differences, interchange fees, merchant reserves and exception items cause differences between the amounts received from the card networks and the amounts funded to the merchants. Since settlement funds are required to be in the possession of a member bank until the merchant is funded, these funds are not assets of the Company and the associated obligations related to these funds are not liabilities of the Company. Therefore, neither is recognized in the Company’s consolidated balance sheets. Member banks held merchant funds of $115.4 million and $103.8 million at March 31, 2021 and December 31, 2020, respectively. Exception items include items such as customer chargeback amounts received from merchants and other losses. Under agreements between the Company and its merchant customers, the merchants assume liability for such chargebacks and losses. If the Company is ultimately unable to collect amounts from the merchants for any charges or losses due to merchant fraud, insolvency, bankruptcy or any other reason, it may be liable for these charges. In order to mitigate the risk of such liability, the Company may 1) require certain merchants to establish and maintain reserves designed to protect the Company from such charges or losses under its risk-based underwriting policy and 2) engage with certain ISOs in partner programs in which the ISOs assume liability for these charges or losses. A merchant reserve account is funded by the merchant and held by the member bank during the term of the merchant agreement. Unused merchant reserves are returned to the merchant after termination of the merchant agreement or in certain instances upon a reassessment of risks during the term of the merchant agreement. Exception items that become the liability of the Company are recorded as merchant losses, a component of costs of services in the consolidated statements of operations. Exception items that the Company is still attempting to collect from the merchants through the funds settlement process or merchant reserves are recognized as settlement assets in the Company’s consolidated balance sheets, with an offsetting reserve for those amounts the Company estimates it will not be able to recover. Expenses for actual and estimated merchant losses for the three months ended March 31, 2021 and March 31, 2020 were $0.4 million and $1.0 million, respectively. Commercial Payments Segment In the Company’s Commercial Payments segment, the Company earns revenue from certain of its services by processing ACH transactions for financial institutions and other business customers. Customers transfer funds to the Company, which are held in bank accounts controlled by the Company until such time as the ACH transactions are made. The Company recognizes these cash balances within restricted cash and settlement obligations in its consolidated balance sheets. The Company's settlement assets and obligations at March 31, 2021 and December 31, 2020 were as follows: (in thousands) March 31, 2021 December 31, 2020 Settlement Assets: Card settlements due from merchants, net of estimated losses $ 1,065 $ 753 Card settlements due from ISOs 155 — Total settlement assets $ 1,220 $ 753 Settlement Obligations: Due to ACH payees (1) 50,820 72,878 Total settlement obligations $ 50,820 $ 72,878 (1) Amounts due to ACH payees are held by the Company in restricted cash. |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 3 Months Ended |
Mar. 31, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND OTHER INTANGIBLE ASSETS | GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill The Company records goodwill when an acquisition is made and the purchase price is greater than the fair value assigned to the underlying separately-identifiable tangible and intangible assets acquired and the liabilities assumed. All of the Company's goodwill was allocated to the Company's Consumer Payments reporting unit at March 31, 2021 and December 31, 2020. The Company considered the market conditions generated by the COVID-19 pandemic and concluded that there were no indicators of impairment for the goodwill of the Consumer Payments reporting unit for the three months ended March 31, 2021. The Company tests goodwill for impairment on an annual basis, or when events occur or circumstances indicate the fair value of a reporting unit may be below its carrying value. The Company will continue to monitor the economic impact of COVID-19 on its ongoing assessment of goodwill. The Company expects to perform its next annual goodwill impairment test during the fourth quarter of 2021 using market data and discounted cash flow analysis. The Company concluded there was no impairment as of March 31, 2021 or December 31, 2020. As such, there was no accumulated impairment loss as of March 31, 2021 and December 31, 2020. Other Intangible Assets The Company's other intangible assets include acquired merchant portfolios, customer relationships, ISO relationships, trade names, technology, and residual buyouts. As of March 31, 2021 and December 31, 2020, intangible assets consisted of the following: (in thousands) March 31, 2021 December 31, 2020 Other intangible assets: Merchant portfolios $ 55,816 $ 55,816 Customer relationships 40,740 40,740 Residual buyouts 116,112 116,112 Non-compete agreements 3,390 3,390 Trade names 2,870 2,870 Technology 14,390 14,390 ISO relationships 15,200 15,200 Total gross carrying value 248,518 248,518 Less accumulated amortization: Merchant portfolios (22,028) (19,471) Customer relationships (31,071) (30,267) Residual buyouts (75,975) (72,659) Non-compete agreements (3,390) (3,390) Trade names (1,711) (1,651) Technology (13,975) (13,951) ISO relationships (7,553) (7,319) Total accumulated amortization (155,703) (148,708) Accumulated allowance for impairment (1,753) (1,753) Net carrying value $ 91,062 $ 98,057 See Note 9 , Commitments and Contingencies, for information about an acquired merchant portfolio with a contingent purchase price. Amortization expense for finite-lived intangible assets was $7.0 million and $8.5 million for the three months ended March 31, 2021 and March 31, 2020, respectively. Amortization expense for future periods could differ due to new intangible asset acquisitions, changes in useful lives of existing intangible assets, and other relevant events or circumstances. The Company tests intangible assets for impairment when events occur or circumstances indicate that the fair value of an intangible asset or group of intangible assets may be impaired. In the Company's Consumer Payments segment, a residual buyout intangible asset with a net carrying value of $2.2 million was deemed to be impaired at December 31, 2020. The fair value of this intangible asset was estimated to be approximately $0.5 million, resulting in the recognition of an impairment charge of $1.8 million. This impairment was the result of diminished cash flows generated by the merchant portfolio. |
PROPERTY, EQUIPMENT AND SOFTWAR
PROPERTY, EQUIPMENT AND SOFTWARE | 3 Months Ended |
Mar. 31, 2021 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY, EQUIPMENT AND SOFTWARE | PROPERTY, EQUIPMENT, AND SOFTWARE The Company's property, equipment, and software balance primarily consists of furniture, fixtures, and equipment used in the normal course of business, computer software developed for internal use, and leasehold improvements. Computer software represents purchased software and internally developed back office and merchant interfacing systems used to assist the reporting of merchant processing transactions and other related information. A summary of property, equipment, and software as of March 31, 2021 and December 31, 2020 follows: (in thousands) March 31, 2021 December 31, 2020 Furniture and fixtures $ 2,795 $ 2,795 Equipment 11,442 10,216 Computer software 46,065 44,320 Leasehold improvements 6,250 6,250 66,552 63,581 Less accumulated depreciation (42,761) (40,706) Property, equipment, and software, net $ 23,791 $ 22,875 |
ACCOUNTS PAYABLE AND ACCRUED EX
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | 3 Months Ended |
Mar. 31, 2021 | |
Accounts Payable [Abstract] | |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | ACCOUNTS PAYABLE AND ACCRUED EXPENSES The Company accrues for certain expenses that have been incurred and not paid, which are classified within accounts payable and accrued expenses in the accompanying consolidated balance sheets. The components of accounts payable and accrued expenses that exceeded five percent of total current liabilities at either March 31, 2021 or December 31, 2020 consisted of the following: (in thousands) March 31, 2021 December 31, 2020 Accrued card network fees $ 8,160 $ 8,041 |
DEBT OBLIGATIONS
DEBT OBLIGATIONS | 3 Months Ended |
Mar. 31, 2021 | |
Debt Disclosure [Abstract] | |
DEBT OBLIGATIONS | DEBT OBLIGATIONS Outstanding debt obligations as of March 31, 2021 and December 31, 2020 consisted of the following: (in thousands) March 31, 2021 December 31, 2020 Senior Credit Agreement: Term facility - Matures January 3, 2023 and bears interest at LIBOR (with a LIBOR "floor" of 1.00% beginning March 18, 2020) plus 6.50% and 6.50% at March 31, 2021 and December 31, 2020, respectively (actual rate of 7.50% and 7.50% at March 31, 2021 and December 31, 2020, respectively) $ 274,557 $ 279,417 Revolving credit facility - $25.0 million line, matures January 22, 2022, and bears interest at LIBOR plus 6.50% and 6.50% at March 31, 2021 and December 31, 2020, respectively (actual rate of 6.65% and 6.65% at March 31, 2021 and December 31, 2020, respectively) — — Term Loan - Subordinated, matures July 3, 2023 and bears interest at 5.00% plus an applicable margin (actual rate of 12.50% and 12.50% at March 31, 2021 and December 31, 2020, respectively) 104,547 102,623 Total debt obligations 379,104 382,040 Less: current portion of long-term debt (24,302) (19,442) Less: unamortized debt discounts and deferred financing costs (4,135) (4,725) Long-term debt, net $ 350,667 $ 357,873 Substantially all of the Company's assets are pledged as collateral under the credit agreements. The Company is neither a borrower nor a guarantor of the credit agreements. The Company's subsidiaries that are borrowers or guarantors under the credit agreements are referred to as the "Borrowers." Senior Credit Agreement Outstanding borrowings under that certain Credit and Guaranty Agreement, dated as of January 3, 2017, with Truist (the “Senior Credit Agreement”) accrue interest using either a base rate (as defined) or a LIBOR rate plus an applicable margin, or percentage per annum, as provided in the amended credit agreement. For the term loan facility of our Senior Credit Agreement, the Sixth Amendment, which was executed on March 18, 2020, thereto provides for a LIBOR "floor" of 1.0% per annum. Accrued interest is payable monthly. The revolving credit facility incurs a commitment fee on any undrawn amount of the $25.0 million credit line, which equates to 0.50% per annum for the unused portion. Term Loan Agreement Outstanding borrowings under that certain Credit and Guaranty Agreement, dated as of January 3, 2017, with Goldman Sachs Specialty Lending Group, L.P. (the “Term Loan Agreement”) accrue interest at 5.0%, plus an applicable margin, or percentage per annum, as indicated in the amended credit agreement. Accrued interest is payable quarterly at 5.0% per annum, and the accrued interest attributable to the applicable margin is capitalized as payment-in-kind ("PIK") interest each quarter. Contractual Maturities Based on terms and conditions existing at March 31, 2021, future minimum principal payments for long-term debt are as follows: (in thousands) Principal Due Senior Credit Agreement Term Loan Agreement Total Twelve-month period ending March 31, Term Revolver Term 2022 (current) $ 24,302 $ — $ — $ 24,302 2023 250,255 — — 250,255 2024 — — 104,547 104,547 Total $ 274,557 $ — $ 104,547 $ 379,104 Additionally, the Company may be obligated to make certain additional mandatory prepayments after the end of each year based on excess cash flow, as defined in the Senior Credit Agreement. No such prepayments were made for the year ended December 31, 2020. Under the Senior Credit Agreement, prepayments of outstanding principal may be made in permitted increments with a 1% penalty for certain prepayments. Under the Term Loan Agreement, prepayments of outstanding principal are subject to a 2.0% penalty for certain prepayments occurring between March 18, 2021 and March 18, 2022. Such penalties are based on the principal amount that is prepaid, subject to the terms of the credit agreements. PIK Interest The principal amount borrowed and outstanding under the Term Loan Agreement was $80.0 million at March 31, 2021 and December 31, 2020. Included in the outstanding obligation balance at March 31, 2021 and December 31, 2020 was accumulated PIK interest of $24.5 million and $22.6 million, respectively. For the three months ended March 31, 2021 and March 31, 2020, PIK interest added $1.9 million and $1.4 million, respectively, to the obligation balance under the Term Loan Agreement. Interest Expense and Amortization of Deferred Loan Costs and Discounts Interest expense, including fees for undrawn amounts under the revolving credit facility and amortization of deferred financing costs and debt discounts, was $9.2 million and $10.3 million for the three months ended March 31, 2021 and March 31, 2020, respectively. Interest expense increased due to the amortization of deferred financing costs and debt discounts by $0.6 million and $0.5 million for the three months ended March 31, 2021 and March 31, 2020, respectively. For the Sixth Amendment, executed in the first quarter of 2020, $2.7 million of lender fees were deferred and added to then-existing unamortized loan costs and discount. Costs that the Company incurs for debt modification that are not eligible for deferral and subsequent amortization as interest expense are reported as debt modification costs on the Company's consolidated statement of operations. Approximately $0.4 million of such costs were expensed in connection with the Sixth Amendment during the first quarter of 2020. When the $106.5 million principal repayment was made in September 2020 for the term facility of the Senior Credit Agreement, it was deemed to be a partial extinguishment of debt that was permitted and contemplated by the existing debt agreement, as previously amended. As a result, a proportional amount of unamortized loan costs and discount in the amount of $1.5 million was removed and expensed during the third quarter of 2020. Covenants The Senior Credit Agreement and the Term Loan Agreement, as amended, contain representations and warranties, financial and collateral requirements, mandatory payment events, events of default, and affirmative and negative covenants, including without limitation, covenants that restrict among other things, the ability to create liens, pay dividends or distribute assets from the Company's subsidiaries to the Company, merge or consolidate, dispose of assets, incur additional indebtedness, make certain investments or acquisitions, enter into certain transactions (including with affiliates), and to enter into certain leases. The Company is also required to comply with certain restrictions on its Total Net Leverage Ratio, which is defined in the credit agreements as the ratio of consolidated total debt of the Borrowers to the Company's consolidated adjusted EBITDA (as defined in the Senior Credit Agreement and Term Loan Agreement). The maximum permitted Total Net Leverage Ratio was 7.71:1.00 at March 31, 2021. As of March 31, 2021, the Company remained in compliance with the covenants. Refinancing in April 2021 See Note 16, Subsequent Events , for information on the new Credit and Guaranty Agreement executed by the Borrowers on April 27, 2021. |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The Company's effective income tax rate for the three months ended March 31, 2021 was 45.4%. Our effective income tax rate for the three months ended March 31, 2021 differed from the U.S. statutory rate primarily as a result of changes to our valuation allowance for interest limited under section 163(j) of the Internal Revenue Code. The Company's effective income tax rate for the three months ended March 31, 2020 was 17.4%. Our effective income tax rate for the three months ended March 31, 2020 differed from the U.S. statutory rate primarily as a result of changes to our valuation allowance for interest limited under section 163(j) of the Internal Revenue Code and related favorable interest limitation provisions of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). Valuation Allowance for Deferred Income Tax Assets The Company considers all available positive and negative evidence to determine whether sufficient taxable income will be generated in the future to permit realization of the existing deferred tax assets. In accordance with the provisions of ASC 740, Income Taxes ("ASC 740"), the Company is required to provide a valuation allowance against deferred income tax assets when it is "more likely than not" that some portion or all of the deferred tax assets will not be realized. Based on management’s assessment, as of the first quarter of 2021, the Company continues to record a full valuation allowance against non-deductible interest expense. The Company will continue to evaluate the realizability of the net deferred tax asset on a quarterly basis and, as a result, the valuation allowance may change in future periods. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Minimum Annual Commitments with Third-Party Processors The Company has multi-year agreements with third parties to provide certain payment processing services to the Company. The Company pays processing fees under these agreements that are based on the volume and dollar amounts of processed payment transactions. Some of these agreements have minimum annual requirements for processing volumes. Based on existing contracts in place at March 31, 2021, the Company is committed to pay minimum processing fees under these agreements of approximately $14.8 million in 2021 and $7.8 million in both 2022 and 2023. Commitment to Lend See Note 10, Related Party Transactions , for information on a loan commitment extended by the Company to another entity. Contingent Consideration for Asset Acquisitions Under GAAP that applies to asset acquisitions that do not meet the definition of a business, the portion of the unpaid purchase price that is contingent on future activities is not initially recorded by the acquirer on the date of acquisition. Rather, the acquirer generally recognizes contingent consideration when it becomes probable and estimable. On March 15, 2019, a subsidiary of the Company paid $15.2 million cash to acquire certain residual portfolio rights. This asset acquisition became part of the Company's Consumer Payments reportable segment. The initial purchase price is subject to an increase of up to $6.4 million in accordance with the terms of the agreement between the Company and the sellers. As of March 31, 2021, an additional $4.3 million of the $6.4 million total contingent consideration has been paid to the seller, while the remaining $2.1 million will be payable in the first quarter of 2022 if certain criteria are achieved. Legal Proceedings The Company is involved in certain legal proceedings and claims which arise in the ordinary course of business. In the opinion of the Company and based on consultations with inside and outside counsel, the results of any of these matters, individually and in the aggregate, are not expected to have a material effect on the Company's results of operations, financial condition, or cash flows. As more information becomes available, and the Company determines that an unfavorable outcome is probable on a claim and that the amount of probable loss that the Company will incur on that claim is reasonably estimable, the Company will record an accrued expense for the claim in question. If and when the Company records such an accrual, it could be material and could adversely impact the Company's results of operations, financial condition, and cash flows. Concentration of Risks The Company's revenue is substantially derived from processing Visa and MasterCard bank card transactions. Because the Company is not a member bank, in order to process these bank card transactions, the Company maintains sponsorship agreements with member banks which require, among other things, that the Company abide by the by-laws and regulations of the card associations. A majority of the Company's cash and restricted cash is held in certain financial institutions, substantially all of which is in excess of federal deposit insurance corporation limits. The Company does not believe it is exposed to any significant credit risk from these transactions. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2021 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | RELATED PARTY TRANSACTIONS Commitment to Lend and Warrant to Acquire During 2019, the Company, through one of its wholly-owned subsidiaries, executed an interest-bearing loan and commitment agreement with another entity. The Company has loaned the entity a total of $3.5 million at March 31, 2021 and December 31, 2020, with a commitment to loan up to a total of $10.0 million based on certain growth metrics of the entity and continued compliance by the entity with the terms and covenants of the agreement. The Company's commitment to make additional advances under the loan agreement is dependent upon such advances not conflicting with covenants or restrictions under any of the Company's debt or other applicable agreements. Amounts loaned to this entity by the Company are secured by substantially all of the assets of the entity and by a personal guarantee. The note receivable has an interest rate of 12.0% per annum and is repayable in full in May 2024. The Company also received a warrant to purchase a non-controlling interest in this entity's equity at a fixed amount. The loan agreement also gives the Company certain rights to purchase some or all of this entity's equity in the future, at the entity's then-current fair value. The fair values of the warrant, loan commitment, and purchase right were not material at inception or at March 31, 2021. Contributions of Assets and Contingent Payment In February 2019, a subsidiary of the Company, Priority Hospitality Technology, LLC ("PHOT"), received a contribution of substantially all of the operating assets of eTab, LLC ("eTab") and CUMULUS POS, LLC ("Cumulus") under asset contribution agreements. No material liabilities were assumed by PHOT. These contributed assets were composed substantially of technology-related assets. Prior to these transactions, eTab was 80.0% owned by the Company's Chairman and Chief Executive Officer. No cash consideration was paid to the contributors of the eTab or Cumulus assets on the date of the transactions. As consideration for these contributed assets, the contributors were issued redeemable preferred equity interests in PHOT. Under these redeemable preferred equity interests, the contributors are eligible to receive up to $4.5 million of profits earned by PHOT, plus a preferred yield (6.0% per annum) on any of the $4.5 million amount that has not been distributed to them. The Company's Chairman and Chief Executive Officer owns 83.3% of the redeemable preferred equity interests in PHOT. Once a total of $4.5 million plus the preferred yield has been distributed to the holders of the redeemable preferred equity interests, the redeemable preferred equity interests will cease to exist. The Company determined that the contributor's carrying value of the eTab net assets (as a common control transaction under GAAP) was not material. Under the guidance for a common control transaction, the contribution of the eTab net assets did not result in a change of entity or the receipt of a business, therefore the Company's financial statements for prior periods have not been adjusted to reflect the historical results attributable to the eTab net assets. Additionally, no material amount was estimated for the fair value of the contributed Cumulus net assets. PHOT is a part of the Company's Integrated Partners reportable segment. Pursuant to the limited liability company agreement of PHOT, any material undistributed earnings generated by the eTab and Cumulus assets that are attributable to the holders of the preferred equity interests are reported by the Company as a form of NCI classified as mezzanine equity on the Company's consolidated balance sheet until $4.5 million and the preferred yield have been distributed to the holders of the preferred equity interests. Subsequent changes, if material, in the value of the NCI will be reported as an equity transaction between the Company's consolidated retained earnings (accumulated deficit) and any carrying value of the NCI in mezzanine equity. Such amounts were not material to the Company's results of operations, financial position, or cash flows for the period covering February 1, 2019 (date the assets were contributed to the Company) through June 30 2020, and therefore no recognition of the NCI was reflected in the Company's consolidated financial statements. For the period from July 1, 2020 through December 31, 2020, a total of $250,000 of PHOT's earnings were attributable to the NCIs of PHOT, and this same amount was also distributed in cash to the NCIs during the same reporting period. Such amounts were not material to the Company's results of operations, financial position, or cash flows for the three months ended March 31, 2021. Equity-Method Investment |
RECONCILIATION OF STOCKHOLDERS'
RECONCILIATION OF STOCKHOLDERS' DEFICIT AND NON-CONTROLLING INTERESTS | 3 Months Ended |
Mar. 31, 2021 | |
Equity [Abstract] | |
RECONCILIATION OF STOCKHOLDERS' DEFICIT AND NON-CONTROLLING INTERESTS | RECONCILIATION OF STOCKHOLDERS' DEFICIT AND NON-CONTROLLING INTERESTS The Company is authorized to issue 100,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the board of directors. As of March 31, 2021 and December 31, 2020, the Company has not issued any shares of preferred stock. See Note 16, Subsequent Events , for information on the Securities Purchase Agreement the Company executed on April 27, 2021. The following tables provide a reconciliation of the beginning and ending carrying amounts for the periods presented for the components of which is the deficit attributable to stockholders of the Company and equity attributable to non-controlling interest: (in thousands) Additional Paid-In Capital Accumulated (Deficit) Total Priority Technology Holdings, Inc. Stockholders' (Deficit) Preferred Stock Common Stock Treasury Stock (a) Shares Amount Shares Amount Shares Amount January 1, 2021 — $ — 67,391 $ 68 451 $ (2,388) $ 5,769 $ (102,013) $ (98,564) Equity-classified stock-based compensation — — — — — — 558 — 558 Vesting of stock-based compensation — — 159 — — — — — — Liability-classified stock-based compensation converted to equity-classified — — — — — — 313 — 313 Net loss — — — — — — — (2,679) (2,679) Proceeds from exercise of stock options — — 90 — — — 617 — 617 March 31, 2021 — $ — 67,640 $ 68 451 $ (2,388) $ 7,257 $ (104,692) $ (99,755) (in thousands) Additional Paid-In Capital Accumulated (Deficit) Total Priority Technology Holdings, Inc. Stockholders' (Deficit) NCI (b) Preferred Stock Common Stock Treasury Stock (a) Shares Amount Shares Amount Shares Amount January 1, 2020 — $ — 67,061 $ 68 451 $ (2,388) $ 3,651 $ (127,674) $ (126,343) $ 5,654 Equity-classified stock-based compensation — — — — — — 338 — 338 — Net loss — — — — — — — (5,869) (5,869) — March 31, 2020 — $ — 67,061 $ 68 451 $ (2,388) $ 3,989 $ (133,543) $ (131,874) $ 5,654 (a) At cost (b) Prior to third quarter 2020, this balance was related to the acquisition of certain assets from YapStone, Inc. by the Company's PRET subsidiary during 2019. As part of the consideration for the assets acquired from YapStone, Inc. by PRET, YapStone, Inc. was issued a NCI in PRET with an initial estimated fair value and carrying value of $5,654,000. For all reporting periods since PRET's inception through June 30, 2020, no earnings or losses were attributable to the NCIs of PRET. During the three months ended September 30, 2020, a gain on a sale of assets from PRET resulted in the attribution of a total of $45.1 million to the NCIs of PRET. This amount was also distributed in a final redemption of the NCIs' interests in PRET during the three months ended September 30, 2020 |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 3 Months Ended |
Mar. 31, 2021 | |
Share-based Payment Arrangement [Abstract] | |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION Stock-based compensation expense is included in Salary and employee benefits in the accompanying unaudited condensed consolidated statements of operations. The Company recognizes the effects of forfeitures on compensation expense as the forfeitures occur. Expense recognized for equity-classified stock compensation under the 2018 Equity Incentive Plan was $0.6 million and $0.3 million for the three months ended March 31, 2021 and March 31, 2020, respectively. During the three months ended March 31, 2021, the Company converted a $0.3 million liability-classified stock compensation accrual for restricted stock units under the 2018 Equity Incentive Plan, whereby the service inception date preceded the future grant-date, to an equity-classified award when the restricted stock units were granted. Income tax benefit for the stock-based compensation was not material for the three months ended March 31, 2021 and March 31, 2020. |
FAIR VALUE
FAIR VALUE | 3 Months Ended |
Mar. 31, 2021 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE | FAIR VALUE Fair Value Measurements At March 31, 2021 and December 31, 2020, the Company no longer has any fair value estimates that are required to be remeasured at the end of each reporting period on a recurring basis. Fair Value Disclosures Notes Receivable Notes receivable are carried at amortized cost. Substantially all of the Company's notes receivable are secured, and the Company has provided for allowances when it believes that certain notes receivable may not be collectible. The fair value of the Company's notes receivable, net at March 31, 2021 and December 31, 2020 was approximately $6.9 million and $7.7 million, respectively. On the fair value hierarchy, Level 3 inputs are used to estimate the fair value of these notes receivable. Debt Obligations The Borrower's outstanding debt obligations (see Note 7, Debt Obligations ) are reflected in the Company's consolidated balance sheets at carrying value since the Company did not elect to remeasure debt obligations to fair value at the end of each reporting period. The fair value of the term loan facility under the Borrowers' Senior Credit Agreement at March 31, 2021 and December 31, 2020 was estimated to be approximately $275.2 million and $278.0 million, respectively. The fair value of these notes with a notional value and carrying value (gross of deferred costs and discounts) of $274.6 million and $279.4 million, respectively, was estimated using binding and non-binding quoted prices in an active secondary market, which considers the Borrowers' credit risk and market related conditions, and is within Level 3 of the fair value hierarchy. The carrying values of the Borrowers' other long-term debt obligations approximate fair value due to mechanisms in the credit agreements that adjust the applicable interest rates and the lack of a market for these debt obligations. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 3 Months Ended |
Mar. 31, 2021 | |
Segment Reporting [Abstract] | |
SEGMENT INFORMATION | SEGMENT INFORMATIONAt March 31, 2021, the Company has three reportable segments that are reviewed by the Company's chief operating decision maker ("CODM"), who is the Company's Chief Executive Officer and Chairman. The Consumer Payments operating segment and the Integrated Partners operating segments are each reported as separate reportable segments. The Commercial Payments and Institutional Services (sometimes referred to as Managed Services) operating segments are aggregated into one reportable segment, Commercial Payments. More information about our three reportable segments: • Consumer Payments – represents consumer-related services and offerings including merchant acquiring and transaction processing services including the proprietary MX enterprise suite. Either through acquisition of merchant portfolios or through resellers, the Company becomes a party or enters into contracts with a merchant and a sponsor bank. Pursuant to the contracts, for each card transaction, the sponsor bank collects payment from the credit, debit or other payment card issuing bank, net of interchange fees due to the issuing bank, pays credit card association (e.g., Visa, MasterCard) assessments and pays the transaction fee due to the Company for the suite of processing and related services it provides to merchants, with the remainder going to the merchant. • Commercial Payments – represents services provided to certain enterprise customers, including outsourced sales force to those customers and accounts payable automation services to commercial customers. • Integrated Partners – represents payment adjacent services that are provided primarily to the health care, real estate, and hospitality industries. In September 2020, the Company sold a substantial portion of the assets of this segment. Corporate includes costs of corporate functions and shared services not allocated to the reportable segments. Information on reportable segments and reconciliations to consolidated revenues, consolidated income (loss) from operations, and consolidated depreciation and amortization are as follows for the periods presented: (in thousands) Three Months Ended March 31, 2021 2020 Revenues: Consumer Payments $ 108,393 $ 86,031 Commercial Payments 3,500 6,368 Integrated Partners 1,404 4,534 Consolidated revenues $ 113,297 $ 96,933 Income (loss) from operations: Consumer Payments $ 13,363 $ 7,152 Commercial Payments (409) 764 Integrated Partners 92 368 Corporate (8,519) (4,725) Consolidated income from operations $ 4,527 $ 3,559 Depreciation and amortization: Consumer Payments $ 8,579 $ 8,583 Commercial Payments 74 76 Integrated Partners 129 1,311 Corporate 288 302 Consolidated depreciation and amortization $ 9,070 $ 10,272 A reconciliation of total income from operations of reportable segments to net loss is provided in the following table: (in thousands) Three Months Ended March 31, 2021 2020 Total income from operations of reportable segments $ 13,046 $ 8,284 Corporate (8,519) (4,725) Interest expense (9,168) (10,315) Other expenses, net (269) (346) Income tax benefit 2,231 1,233 Net loss $ (2,679) $ (5,869) Substantially all revenue is generated in the United States. For the three months ended March 31, 2021 and March 31, 2020 , no one merchant customer accounted for 10% or more of the Company's consolidated revenues. Most of the Company's merchant customers were referred to the Company by an ISO or other referral partners. If the Company's agreement with an ISO allows the ISO to have merchant portability rights, the ISO can potentially move the underlying merchant relationships to another merchant acquirer upon notice to the Company and completion of a "wind down" period. For the three months ended March 31, 2021 and March 31, 2020, merchants referred by one ISO organization with potential merchant portability rights generated revenue within the Company's Consumer Payments reportable segment that represented approximately 23.3% and 20.1%, respectively, of the Company's consolidated revenues. On September 22, 2020, Priority Real Estate Technology, LLC (“PRET”), a majority-owned and consolidated subsidiary of the Company, sold certain assets comprising its RentPayment business, which was part of the Integrated Partners reportable segment. The allocation of net proceeds from the sale, after transaction costs, to the PRET members included the return of each member’s invested capital in PRET and excess proceeds were distributed in accordance with the distribution provisions of the PRET LLC governing agreement. Approximately $51.4 million and $45.1 million of the excess proceeds were distributed to the Company and the non-controlling interests, respectively. The initial allocation of net proceeds remained subject to final adjustment with the PRET members at December 31, 2020. During the first quarter of 2021, it was determined that an additional $0.5 million of the excess proceeds are due to the non-controlling interests, which amounts were accrued at March 31, 2021 and included in Other expenses, net in the unaudited condensed consolidated statement of operations. During the first quarter of 2020, RentPayment generated $3.8 million of revenue and $0.6 million of income from operations. |
LOSS PER COMMON SHARE
LOSS PER COMMON SHARE | 3 Months Ended |
Mar. 31, 2021 | |
Earnings Per Share [Abstract] | |
LOSS PER COMMON SHARE | OSS PER COMMON SHARE The following tables set forth the computation of the Company's basic and diluted loss per common share: (in thousands, except per share amounts) Three Months Ended March 31, 2021 2020 Basic and Diluted Loss Per Common Share: Numerator: Net loss $ (2,679) $ (5,869) Less: Income attributable to non-controlling interests — — Net loss attributable to common shareholders $ (2,679) $ (5,869) Denominator: Weighted-average common stock shares outstanding 67,543 67,061 Basic and Diluted Loss Per Common Share $ (0.04) $ (0.09) Potentially anti-dilutive securities that were excluded from loss per common share for the three months ended March 31, 2021 and March 31, 2020 that could be dilutive in future periods were as follows: (in thousands) Common Stock Equivalents at March 31, 2021 March 31, 2020 Outstanding warrants on common stock (1) 3,556 3,556 Outstanding options and warrants issued to adviser (1) 600 600 Restricted stock unit awards (2) 842 395 Outstanding stock option awards (2) 1,394 1,644 Total 6,392 6,195 (1) Issued by M.I. Acquisitions, Inc. prior to July 25, 2018 (2) Granted under the 2018 Equity Incentive Plan |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2021 | |
Subsequent Events [Abstract] | |
Subsequent Events | SUBSEQUENT EVENTS Merger Agreement On March 5,2021, we announced that we had entered into an Agreement and Plan of Merger (the "Merger Agreement") with Finxera Holdings, Inc. ("Finxera"), Prime Warrior Acquisition Corp., an indirect wholly owned subsidiary of the Company ("Merger Sub") and solely in its capacity as the representative of the stockholders or optionholders of Finxera (the "Equityholder Representative"), Stone Point Capital, LLC. Priority will acquire, through a merger of Merger Sub with and into Finxera, the Finxera business. Finxera is a provider of deposit account management payment processing services to the debt settlement industry in the United States. The Merger Agreement provides that, among other things and on the terms and subject to the conditions of the Merger Agreement, (a) Merger Sub will merge with and into Finxera (the “Merger”), with the separate existence of Merger Sub ceasing and Finxera continuing as the surviving entity of the Merger (the “Surviving Entity”); (b) at the effective time of the Merger (the “Effective Time”) each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into one validly issued, fully paid and non-assessable share of common stock, par value $0.01 per share, of the Surviving Entity; and (c) the shares of common stock of Finxera designated as “Class A Common Stock”, “Class B Common Stock” and preferred stock “Series C Participating Preferred Stock” issued and outstanding immediately prior to the closing of the transactions contemplated by the Merger Agreement (the “Closing”) will be converted into rights to receive certain cash and stock consideration and a contingent right to receive a portion of any payments made following the determination of the purchase price adjustments (a “Deferred Payment”). Consideration for the Merger will consist of a combination of cash and stock, with the purchase price comprising of: (a) $425,000,000, plus (b) the aggregate value of the current assets of the Finxera and each of its subsidiaries (the “Group Companies”) less the aggregate value of the current liabilities of the Group Companies, in each case, determined on a consolidated basis without duplication, as of the close of business on the business day immediately preceding the date of the Closing (which may be a positive or negative number), plus (c) the sum of all cash and cash equivalents of the Group Companies as of the close of business on the business day immediately preceding the date of the Closing, minus (d) the amount of indebtedness of the Group Companies as of the close of the business day immediately prior to the date of the Closing, minus (e) the amount of unpaid transaction expenses, minus (f) 25% of the earnings of the Group Companies during the period between the signing of the Merger Agreement and the Closing. Each option to purchase one or more shares of Class B Common Stock of Finxera issued pursuant to the Finxera Holdings, Inc. 2018 Equity Incentive Plan (the “Company Options”), vested as of immediately prior to the Closing (the “Vested Company Option”), that is issued and outstanding immediately prior to the Closing will be deemed to be exercised and converted into the right to receive a cash payment with respect to such Vested Company Option and a contingent right to receive a portion of any Deferred Payments. Securities Purchase Agreement On April 27, 2021, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with credit funds managed by certain affiliates of Ares Management Corporation (the “Investors”), pursuant to which the Company (i) issued and sold 150,000 shares of senior preferred stock, par value $0.001 per share (the “Senior Preferred Stock”, and the shares issued the “Senior Preferred Shares”) at a purchase price of $150,000,000, or $1,000 per Senior Preferred Share (the “Initial Senior Preferred Stock Sale”), and (ii) issued warrants (the “Warrants”) to purchase up to 1,803,841 shares of the Company’s common stock, par value $0.001 per share (“Common Stock” and together with the Warrants, the “Securities”), at an exercise price $0.001. The exercise price and the number of shares issuable upon exercise of the warrants are subject to certain adjustments from time to time on the terms outlined in the Warrants. In addition to the issuance and sale of Senior Preferred Shares which pursuant to the Purchase Agreement, upon the consummation of the Company’s acquisition of Finxera and the satisfaction of other customary closing conditions, the Company will issue and sell to the Investors an additional 50,000 shares of Senior Preferred Stock, at a purchase price of $50,000,000, or $1,000 per share. The Company may also issue and sell to the Investors up to an additional 50,000 shares of Senior Preferred Stock, at a purchase price of $1,000 per share within 18 months after the consummation of the Acquisition Senior Preferred Stock Sale upon the satisfaction of certain customary closing conditions. The Company used the proceeds from the sale of the Securities to fund the Refinancing (as defined below) and to pay certain fees and expenses relating to the Refinancing and the offering of the Securities. Registration Rights Agreement On April 27, 2021 the Company entered into a Registration Rights Agreement, by and among the Company and the Investors (the “Registration Rights Agreement”), pursuant to which the Company agreed to provide certain registration rights with respect to the shares of Common Stock issuable upon exercise of the Warrants (the “Registrable Securities”). Under the Registration Rights Agreement, the holders of the Registrable Securities were granted (i) piggyback rights to be included in certain underwritten offerings of Common Stock and (ii) the right to demand a shelf registration of Registrable Securities. Credit and Guaranty Agreement On April 27, 2021, Priority Holdings, LLC, a Delaware limited liability company (“Holdings”), which is a direct wholly-owned subsidiary of the Company, and certain direct and indirect subsidiaries of Holdings (together with Holdings, collectively, the “Loan Parties”), entered into a Credit and Guaranty Agreement (the “Credit Agreement”) with Truist Bank (“Truist”) and the lenders party thereto, pursuant to which Holdings has access to senior credit facilities in an aggregate principal amount of $630.0 million which are secured by substantially all of the assets of the Loan Parties and by the equity interests of Holdings. The credit facilities under the Credit Agreement are comprised of (i) a senior secured first lien term loan facility in an aggregate principal amount of $300,000,000 (the “Initial Term Loan”), the proceeds of which have been used to fund the Refinancing, (ii) a senior secured revolving credit facility in an aggregate amount not to exceed $40,000,000 outstanding at any time and (iii) a senior secured first lien delayed draw term loan facility in an aggregate principal amount of $290,000,000, the proceeds of which may be used to fund the Company’s acquisition of Finxera. Prepayments Under the Credit Agreement, prepayments of outstanding principal may be made in permitted increments with a 1.0% penalty for certain prepayments made in connection with repricing transactions. Such premium will be based on the principal amount that is prepaid, subject to the terms of the credit agreements. Acceleration The outstanding amount of any loans and any other amounts owing by the Loan Parties under the Credit Agreement may, after the occurrence of an Event of Default (as defined in the Credit Agreement), at the option of Truist, be declared immediately due and payable. Events of Default include, without limitation, the failure of the Loan Parties to pay principal, premium or interest when due under the Credit Agreement, or the failure by the Loan Parties to perform or comply with any term or covenant in the Credit Agreement, in each case, subject to any applicable cure periods provided therein. Covenants The Credit Agreement contains representations and warranties, financial and collateral requirements, mandatory payment events, events of default, and affirmative and negative covenants, including without limitation, covenants that restrict among other things, the ability to create liens, pay dividends or distribute assets from the Loan Parties to the Company, merge or consolidate, dispose of assets, incur additional indebtedness, make certain investments or acquisitions, enter into certain transactions (including with affiliates), and to enter into certain leases. If the aggregate principal amount of outstanding revolving loans and letters of credit under the Credit Agreement exceeds 35% of the total revolving facility thereunder, the Loan Parties are required to comply with certain restrictions on its Total Net Leverage Ratio, which is defined in the Credit Agreement as the ratio of consolidated total debt of the Loan Parties to the Loan Parties Consolidated Adjusted EBITDA (as defined in the Credit Agreement). If applicable, the maximum permitted Total Net Leverage Ratio is (i) 6.50:1.00 at each fiscal quarter ended September 30, 2021 through June 30, 2022, (ii) 6.00:1.00 at each fiscal quarter ended September 30, 2022 through June 30, 2023, and (iii) 5.50:1.00 at each fiscal quarter ended September 30, 2023 each fiscal quarter thereafter. Refinancing Holdings and certain other Loan Parties have previously entered into (A) the Term Loan Agreement and (B) the Senior Credit Agreement, the proceeds from the sale of the Securities and from the Initial Term Loan were used to refinance the Term Loan Agreement and the Senior Credit Agreement and all outstanding obligations thereunder were repaid in full (or in the case of outstanding undrawn letters of credit, deemed issued under the Credit Agreement), and all commitments and guaranties in connection therewith have been terminated or released (the “Refinancing”). Residual Purchase Agreement |
BASIS OF PRESENTATION AND SIG_2
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - (Policies) | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Priority Technology Holdings, Inc. and its consolidated subsidiaries are referred to herein collectively as "Priority," "PRTH," the "Company," "we," "our" or "us," unless the context requires otherwise. Priority is a provider of merchant acquiring, integrated payment software and commercial payment solutions. The Company operates on a calendar year ending each December 31 and on four calendar quarters ending on March 31, June 30, September 30, and December 31 of each year. Results of operations reported for interim periods are not necessarily indicative of results for the entire year. |
Consolidation | These unaudited condensed consolidated financial statements include the accounts of the Company including those of its majority-owned subsidiaries, and all material intercompany balances and transactions have been eliminated in consolidation. |
Use of Estimates | The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reported period. Actual results could differ materially from those estimates. In particular, the continued magnitude, duration and effects of the COVID-19 pandemic are difficult to predict, and the ultimate effect could result in future charges related to the recoverability of assets, including financial assets, long-lived assets, goodwill, and other losses |
Comprehensive Income (Loss) | For the three months ended March 31, 2021 and March 31, 2020, the Company had no activities to report as components of other comprehensive income (loss). Therefore, no separate Statement of Comprehensive Income (Loss) was prepared for any reporting period as the Company's net income (loss) from continuing operations comprises all of its comprehensive income (loss). |
Comparability of Reporting Periods | Certain prior period amounts in these unaudited condensed consolidated financial statements have been reclassified to conform to the current period presentation, with no net effect on income from operations, income (loss) before income taxes, net income (loss), stockholders' deficit, or cash flows from operations, investing, or financing activities for any period presented. |
Accounting Policies And New Accounting Standards Adopted and Recently Issued Standards Not Yet Adopted | Simplifying the Accounting for Income Taxes (ASU 2019-12) In December 2019, the FASB issued Accounting Standards Update ("ASU") 2019-12, Simplifying the Accounting for Income Taxes ("ASU 2019-12"), which is intended to enhance and simplify various aspects of the accounting for income taxes. The amendments in this update remove certain exceptions to the general principles in Accounting Standards Codification ("ASC") Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also clarifies and amends existing guidance to improve consistency in application of the accounting for franchise taxes, enacted changes in tax laws or rates and transactions that result in a step-up in the tax basis of goodwill. The adoption of ASU 2019-12 on January 1, 2021 did not have a material effect on our consolidated financial statements. Recently Issued Accounting Standards Pending Adoption The following standards are pending adoption and will likely apply to the Company in future periods based on the Company's current business activities. Implementation Costs Incurred in Cloud Computing Arrangements (ASU 2018-15) In August 2018, the FASB issued ASU 2018-15, Implementation Costs Incurred in Cloud Computing Arrangements ("ASU 2018-15"), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). As an EGC, this ASU is effective for the Company's annual reporting period beginning January 1, 2021, and will be effective for interim periods beginning in 2022. The amendments are applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption, and the Company has not yet made a determination to use the retrospective or prospective adoption method. Based on current operations of the Company, the adoption of ASU 2018-15 is not expected to have a material effect on the Company's results of operations, financial position, or cash flows. Reference Rate Reform (ASU 2020-04) On March 12, 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financial Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contract at the modification date or reassess a previous accounting determination. ASU 2021-01 ASU 2020-04 can be adopted at any time before December 31, 2022. The provisions of ASU 2020-04 may impact the Company if future debt modifications or refinancings utilize one or more of the reference rates covered by the provisions of this ASU. Leases (ASC 842) In February 2016, the FASB issued new lease accounting guidance in ASU No. 2016-02, Leases-Topic 842 , which has been codified in ASC 842, Leases . Under this new guidance, lessees will be required to recognize for all leases (with the exception of short-term leases): 1) a lease liability equal to the lessee's obligation to make lease payments arising from a lease, measured on a discounted basis and 2) a right-of-use asset which will represent the lessee's right to use, or control the use of, a specified asset for the lease term. As an EGC, this standard is effective for the Company's annual and interim reporting periods beginning 2022. The adoption of ASC 842 will require the Company to recognize non-current assets and liabilities for right-of-use assets and operating lease liabilities on its consolidated balance sheet, but it is not expected to have a material effect on the Company's results of operations or cash flows. ASC 842 will also require additional footnote disclosures to the Company's consolidated financial statements. Credit Losses (ASU 2016-13 and ASU 2018-19) In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . This new guidance will change how entities account for credit impairment for trade and other receivables, as well as for certain financial assets and other instruments. ASU 2016-13 will replace the current "incurred loss" model with an "expected loss" model. Under the "incurred loss" model, a loss (or allowance) is recognized only when an event has occurred (such as a payment delinquency) that causes the entity to believe that a loss is probable (i.e., that it has been "incurred"). Under the "expected loss" model, a loss (or allowance) is recognized upon initial recognition of the asset that reflects all future events that leads to a loss being realized, regardless of whether it is probable that the future event will occur. The "incurred loss" model considers past events and current conditions, while the "expected loss" model includes expectations for the future which have yet to occur. The standard will require entities to record a cumulative-effect adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective. The Company is currently evaluating the potential impact that ASU 2016-13 may have on the timing of recognizing future provisions for expected losses on the Company's accounts receivable and notes receivable. Since the Company is a smaller reporting company ("SRC"), the Company must adopt this new standard no later than the beginning of 2023 for annual and interim reporting periods. Goodwill Impairment Testing (ASU 2017-04) In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment . ASU 2017-04 will eliminate the requirement to calculate the implied fair value of goodwill (i.e., step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit's carrying amount over its fair value (i.e., measure the charge based on the current step 1). Any impairment charge will be limited to the amount of goodwill allocated to an impacted reporting unit. ASU 2017-04 will not change the current guidance for completing Step 1 of the goodwill impairment test, and an entity will still be able to perform the current optional qualitative goodwill impairment assessment before determining whether to proceed to Step 1. Upon adoption, the ASU will be applied prospectively. Since the Company is a SRC, the Company must adopt this new standard no later than the beginning of 2023 for annual and interim reporting periods. The impact that ASU 2017-04 may have on the Company's financial condition or results of operations will depend on the circumstances of any goodwill impairment event that may occur after adoption. |
Revenue Recognition | For all periods presented, substantially all of the Company’s revenues from services were recognized over time. Revenues and commissions earned from the sales of payment equipment were typically recognized at a point in time. Transaction Price Allocated to Future Performance Obligations ASC 606, Revenue Recognition ("ASU 606"), requires disclosure of the aggregate amount of the transaction price allocated to unsatisfied performance obligations. However, as allowed by ASC 606, the Company has elected to exclude from this disclosure any contracts with an original duration of one year or less and any variable consideration that meets specified criteria. The Company’s most significant performance obligations consist of variable consideration under a stand-ready series of distinct days of service. Such variable consideration meets the specified criteria for the disclosure exclusion. Therefore, the majority of the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied is variable consideration that is not required for this disclosure. The aggregate fixed consideration portion of customer contracts with an initial contract duration greater than one year is not material. Contract Costs For new, renewed, or anticipated contracts with customers, the Company does not incur material amounts of incremental costs to obtain such contracts, as those costs are defined by ASC 340-40, Related Costs to Obtain or Fulfill a Contract with Customers ("ASU 340-40"). Fulfillment costs, as defined by ASC 340-40, typically benefit only the period (typically a month in duration) in which they are incurred and therefore are expensed in the period incurred (i.e., not capitalized) unless they meet criteria to be capitalized under other accounting guidance. The Company pays commissions to most of its independent sales organizations ("ISOs"), and for certain ISOs the Company also pays (through a higher commission rate) them to provide customer service and other services directly to our merchant customers. The ISO is typically an independent contractor or agent of the Company. Although certain ISOs may have merchant portability rights, the merchant meets the definition of a customer for the Company even if the ISO has merchant portability rights. Since payments to ISOs are dependent substantially on variable merchant payment volumes generated after the merchant enters into a new or renewed contract, these payments to ISOs are not deemed to be a cost to acquire a new contract since the ISO payments are based on factors that will arise subsequent to the event of obtaining a new or renewed contract. Also, payments to ISOs pertain only to a specific month’s activity. For payments made, or due, to an ISO, the expenses are reported within income from operations on our statements of operations. The Company from time-to-time may elect to buy out all or a portion of an ISO’s rights to receive future commission payments related to certain merchants. Amounts paid to the ISO for these residual buyouts are capitalized by the Company under the accounting guidance for intangible assets. Contract Assets and Contract Liabilities A contract with a customer creates legal rights and obligations. As the Company performs under customer contracts, its right to consideration that is unconditional is considered to be accounts receivable. If the Company’s right to consideration for such performance is contingent upon a future event or satisfaction of additional performance obligations, the amount of revenues recognized in excess of the amount billed to the customer is recognized as a contract asset. Contract liabilities represent consideration received from customers in excess of revenues recognized. Material contract assets and liabilities are presented net at the individual contract level in the consolidated balance sheet and are classified as current or noncurrent based on the nature of the underlying contractual rights and obligations. |
REVENUES (Tables)
REVENUES (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Disaggregation of Revenue | The following table presents a disaggregation of the Company's consolidated revenues by type, and the relationships to the Company's reportable segments, for the three months ended March 31, 2021 and March 31, 2020: (in thousands) Three Months Ended March 31, 2021 2020 Revenue Type Merchant card fees $ 107,702 $ 89,086 Outsourced services and other services 4,378 6,791 Equipment 1,217 1,056 Total revenues $ 113,297 $ 96,933 |
Schedule of Contract with Customer, Asset and Liability | Supplemental balance sheet information related to contracts from customers as of March 31, 2021 and December 31, 2020 was as follows: (in thousands) Consolidated Balance Sheet Location March 31, 2021 December 31, 2020 Liabilities: Contract liabilities, net (current) Customer deposits and advance payments $1,162 $1,494 |
SETTLEMENT ASSETS AND OBLIGAT_2
SETTLEMENT ASSETS AND OBLIGATIONS - (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of Settlement Assets | The Company's settlement assets and obligations at March 31, 2021 and December 31, 2020 were as follows: (in thousands) March 31, 2021 December 31, 2020 Settlement Assets: Card settlements due from merchants, net of estimated losses $ 1,065 $ 753 Card settlements due from ISOs 155 — Total settlement assets $ 1,220 $ 753 Settlement Obligations: Due to ACH payees (1) 50,820 72,878 Total settlement obligations $ 50,820 $ 72,878 (1) Amounts due to ACH payees are held by the Company in restricted cash. |
Schedule of Settlement Obligations | The Company's settlement assets and obligations at March 31, 2021 and December 31, 2020 were as follows: (in thousands) March 31, 2021 December 31, 2020 Settlement Assets: Card settlements due from merchants, net of estimated losses $ 1,065 $ 753 Card settlements due from ISOs 155 — Total settlement assets $ 1,220 $ 753 Settlement Obligations: Due to ACH payees (1) 50,820 72,878 Total settlement obligations $ 50,820 $ 72,878 (1) Amounts due to ACH payees are held by the Company in restricted cash. |
GOODWILL AND OTHER INTANGIBLE_2
GOODWILL AND OTHER INTANGIBLE ASSETS - (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets | As of March 31, 2021 and December 31, 2020, intangible assets consisted of the following: (in thousands) March 31, 2021 December 31, 2020 Other intangible assets: Merchant portfolios $ 55,816 $ 55,816 Customer relationships 40,740 40,740 Residual buyouts 116,112 116,112 Non-compete agreements 3,390 3,390 Trade names 2,870 2,870 Technology 14,390 14,390 ISO relationships 15,200 15,200 Total gross carrying value 248,518 248,518 Less accumulated amortization: Merchant portfolios (22,028) (19,471) Customer relationships (31,071) (30,267) Residual buyouts (75,975) (72,659) Non-compete agreements (3,390) (3,390) Trade names (1,711) (1,651) Technology (13,975) (13,951) ISO relationships (7,553) (7,319) Total accumulated amortization (155,703) (148,708) Accumulated allowance for impairment (1,753) (1,753) Net carrying value $ 91,062 $ 98,057 |
PROPERTY, EQUIPMENT AND SOFTW_2
PROPERTY, EQUIPMENT AND SOFTWARE - (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property, Equipment and Software | A summary of property, equipment, and software as of March 31, 2021 and December 31, 2020 follows: (in thousands) March 31, 2021 December 31, 2020 Furniture and fixtures $ 2,795 $ 2,795 Equipment 11,442 10,216 Computer software 46,065 44,320 Leasehold improvements 6,250 6,250 66,552 63,581 Less accumulated depreciation (42,761) (40,706) Property, equipment, and software, net $ 23,791 $ 22,875 |
ACCOUNTS PAYABLE AND ACCRUED _2
ACCOUNTS PAYABLE AND ACCRUED EXPENSES - (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Accounts Payable [Abstract] | |
Schedule of Accounts Payable and Accrued Expenses | The components of accounts payable and accrued expenses that exceeded five percent of total current liabilities at either March 31, 2021 or December 31, 2020 consisted of the following: (in thousands) March 31, 2021 December 31, 2020 Accrued card network fees $ 8,160 $ 8,041 |
DEBT OBLIGATIONS - (Tables)
DEBT OBLIGATIONS - (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Debt Disclosure [Abstract] | |
Schedule of Outstanding Debt Obligations | Outstanding debt obligations as of March 31, 2021 and December 31, 2020 consisted of the following: (in thousands) March 31, 2021 December 31, 2020 Senior Credit Agreement: Term facility - Matures January 3, 2023 and bears interest at LIBOR (with a LIBOR "floor" of 1.00% beginning March 18, 2020) plus 6.50% and 6.50% at March 31, 2021 and December 31, 2020, respectively (actual rate of 7.50% and 7.50% at March 31, 2021 and December 31, 2020, respectively) $ 274,557 $ 279,417 Revolving credit facility - $25.0 million line, matures January 22, 2022, and bears interest at LIBOR plus 6.50% and 6.50% at March 31, 2021 and December 31, 2020, respectively (actual rate of 6.65% and 6.65% at March 31, 2021 and December 31, 2020, respectively) — — Term Loan - Subordinated, matures July 3, 2023 and bears interest at 5.00% plus an applicable margin (actual rate of 12.50% and 12.50% at March 31, 2021 and December 31, 2020, respectively) 104,547 102,623 Total debt obligations 379,104 382,040 Less: current portion of long-term debt (24,302) (19,442) Less: unamortized debt discounts and deferred financing costs (4,135) (4,725) Long-term debt, net $ 350,667 $ 357,873 |
Schedule of Maturities of Long-Term Debt | Based on terms and conditions existing at March 31, 2021, future minimum principal payments for long-term debt are as follows: (in thousands) Principal Due Senior Credit Agreement Term Loan Agreement Total Twelve-month period ending March 31, Term Revolver Term 2022 (current) $ 24,302 $ — $ — $ 24,302 2023 250,255 — — 250,255 2024 — — 104,547 104,547 Total $ 274,557 $ — $ 104,547 $ 379,104 |
RECONCILIATION OF STOCKHOLDER_2
RECONCILIATION OF STOCKHOLDERS' DEFICIT AND NON-CONTROLLING INTERESTS - (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Equity [Abstract] | |
Schedule of Equity Structure | The following tables provide a reconciliation of the beginning and ending carrying amounts for the periods presented for the components of which is the deficit attributable to stockholders of the Company and equity attributable to non-controlling interest: (in thousands) Additional Paid-In Capital Accumulated (Deficit) Total Priority Technology Holdings, Inc. Stockholders' (Deficit) Preferred Stock Common Stock Treasury Stock (a) Shares Amount Shares Amount Shares Amount January 1, 2021 — $ — 67,391 $ 68 451 $ (2,388) $ 5,769 $ (102,013) $ (98,564) Equity-classified stock-based compensation — — — — — — 558 — 558 Vesting of stock-based compensation — — 159 — — — — — — Liability-classified stock-based compensation converted to equity-classified — — — — — — 313 — 313 Net loss — — — — — — — (2,679) (2,679) Proceeds from exercise of stock options — — 90 — — — 617 — 617 March 31, 2021 — $ — 67,640 $ 68 451 $ (2,388) $ 7,257 $ (104,692) $ (99,755) (in thousands) Additional Paid-In Capital Accumulated (Deficit) Total Priority Technology Holdings, Inc. Stockholders' (Deficit) NCI (b) Preferred Stock Common Stock Treasury Stock (a) Shares Amount Shares Amount Shares Amount January 1, 2020 — $ — 67,061 $ 68 451 $ (2,388) $ 3,651 $ (127,674) $ (126,343) $ 5,654 Equity-classified stock-based compensation — — — — — — 338 — 338 — Net loss — — — — — — — (5,869) (5,869) — March 31, 2020 — $ — 67,061 $ 68 451 $ (2,388) $ 3,989 $ (133,543) $ (131,874) $ 5,654 (a) At cost (b) Prior to third quarter 2020, this balance was related to the acquisition of certain assets from YapStone, Inc. by the Company's PRET subsidiary during 2019. As part of the consideration for the assets acquired from YapStone, Inc. by PRET, YapStone, Inc. was issued a NCI in PRET with an initial estimated fair value and carrying value of $5,654,000. For all reporting periods since PRET's inception through June 30, 2020, no earnings or losses were attributable to the NCIs of PRET. During the three months ended September 30, 2020, a gain on a sale of assets from PRET resulted in the attribution of a total of $45.1 million to the NCIs of PRET. This amount was also distributed in a final redemption of the NCIs' interests in PRET during the three months ended September 30, 2020 |
SEGMENT INFORMATION - (Tables)
SEGMENT INFORMATION - (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting Information by Segment | Information on reportable segments and reconciliations to consolidated revenues, consolidated income (loss) from operations, and consolidated depreciation and amortization are as follows for the periods presented: (in thousands) Three Months Ended March 31, 2021 2020 Revenues: Consumer Payments $ 108,393 $ 86,031 Commercial Payments 3,500 6,368 Integrated Partners 1,404 4,534 Consolidated revenues $ 113,297 $ 96,933 Income (loss) from operations: Consumer Payments $ 13,363 $ 7,152 Commercial Payments (409) 764 Integrated Partners 92 368 Corporate (8,519) (4,725) Consolidated income from operations $ 4,527 $ 3,559 Depreciation and amortization: Consumer Payments $ 8,579 $ 8,583 Commercial Payments 74 76 Integrated Partners 129 1,311 Corporate 288 302 Consolidated depreciation and amortization $ 9,070 $ 10,272 |
Schedule of Reconciliation of Revenue from Segments to Consolidated | A reconciliation of total income from operations of reportable segments to net loss is provided in the following table: (in thousands) Three Months Ended March 31, 2021 2020 Total income from operations of reportable segments $ 13,046 $ 8,284 Corporate (8,519) (4,725) Interest expense (9,168) (10,315) Other expenses, net (269) (346) Income tax benefit 2,231 1,233 Net loss $ (2,679) $ (5,869) |
LOSS PER COMMON SHARE - (Tables
LOSS PER COMMON SHARE - (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share | The following tables set forth the computation of the Company's basic and diluted loss per common share: (in thousands, except per share amounts) Three Months Ended March 31, 2021 2020 Basic and Diluted Loss Per Common Share: Numerator: Net loss $ (2,679) $ (5,869) Less: Income attributable to non-controlling interests — — Net loss attributable to common shareholders $ (2,679) $ (5,869) Denominator: Weighted-average common stock shares outstanding 67,543 67,061 Basic and Diluted Loss Per Common Share $ (0.04) $ (0.09) |
Schedule of Antidilutive Securities | Potentially anti-dilutive securities that were excluded from loss per common share for the three months ended March 31, 2021 and March 31, 2020 that could be dilutive in future periods were as follows: (in thousands) Common Stock Equivalents at March 31, 2021 March 31, 2020 Outstanding warrants on common stock (1) 3,556 3,556 Outstanding options and warrants issued to adviser (1) 600 600 Restricted stock unit awards (2) 842 395 Outstanding stock option awards (2) 1,394 1,644 Total 6,392 6,195 (1) Issued by M.I. Acquisitions, Inc. prior to July 25, 2018 (2) Granted under the 2018 Equity Incentive Plan |
REVENUES - Disaggregation of Re
REVENUES - Disaggregation of Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Disaggregation of Revenue [Line Items] | ||
Total revenues | $ 113,297 | $ 96,933 |
Merchant card fees | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | 107,702 | 89,086 |
Outsourced services and other services | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | 4,378 | 6,791 |
Equipment | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | $ 1,217 | $ 1,056 |
REVENUES - Balance Sheet Inform
REVENUES - Balance Sheet Information (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Revenue from Contract with Customer [Abstract] | ||
Contract liabilities, net (current) | $ 1,162 | $ 1,494 |
REVENUES - Narrative (Details)
REVENUES - Narrative (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Revenue from Contract with Customer [Abstract] | ||
Contract liabilities, net | $ 1.7 | $ 1.9 |
SETTLEMENT ASSETS AND OBLIGAT_3
SETTLEMENT ASSETS AND OBLIGATIONS - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||
Merchant reserves held by sponsor banks | $ 115.4 | $ 103.8 | |
Provision for merchant losses | $ 0.4 | $ 1 |
SETTLEMENT ASSETS AND OBLIGAT_4
SETTLEMENT ASSETS AND OBLIGATIONS - Settlement Assets and Obligations (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Merchant reserves held by sponsor banks | $ 115,400 | $ 103,800 |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Settlement assets | 1,220 | 753 |
Settlement obligations | 50,820 | 72,878 |
Due to ACH payees | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Settlement obligations | 50,820 | 72,878 |
Card settlements due from merchants, net of estimated losses | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Settlement assets | 1,065 | 753 |
Card settlements due from ISOs | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Settlement assets | $ 155 | $ 0 |
GOODWILL AND OTHER INTANGIBLE_3
GOODWILL AND OTHER INTANGIBLE ASSETS - Narrative (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Goodwill impairment loss | $ 0 | $ 0 | |
Goodwill accumulated impairment loss | 0 | 0 | |
Amortization of intangible assets | 7,000,000 | $ 8,500,000 | |
Finite-Lived Intangible Assets [Line Items] | |||
Intangible assets, gross | $ 248,518,000 | 248,518,000 | |
Residual buyouts | |||
Finite-Lived Intangible Assets [Line Items] | |||
Intangible assets, gross | 2,200,000 | ||
Intangible assets, fair value | 500,000 | ||
Impairment charge for intangible asset | $ 1,800,000 |
GOODWILL AND OTHER INTANGIBLE_4
GOODWILL AND OTHER INTANGIBLE ASSETS - Intangible Assets (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | $ 248,518 | $ 248,518 |
Intangible assets, accumulated amortization | (155,703) | (148,708) |
Accumulated allowance for impairment | (1,753) | (1,753) |
Intangible assets, net | 91,062 | 98,057 |
Merchant portfolios | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | 55,816 | 55,816 |
Intangible assets, accumulated amortization | (22,028) | (19,471) |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | 40,740 | 40,740 |
Intangible assets, accumulated amortization | (31,071) | (30,267) |
Residual buyouts | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | 116,112 | 116,112 |
Intangible assets, accumulated amortization | (75,975) | (72,659) |
Non-compete agreements | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | 3,390 | 3,390 |
Intangible assets, accumulated amortization | (3,390) | (3,390) |
Trade names | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | 2,870 | 2,870 |
Intangible assets, accumulated amortization | (1,711) | (1,651) |
Technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | 14,390 | 14,390 |
Intangible assets, accumulated amortization | (13,975) | (13,951) |
ISO relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | 15,200 | 15,200 |
Intangible assets, accumulated amortization | $ (7,553) | $ (7,319) |
PROPERTY, EQUIPMENT AND SOFTW_3
PROPERTY, EQUIPMENT AND SOFTWARE (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Property, Plant and Equipment [Line Items] | |||
Property, equipment and software, gross | $ 66,552 | $ 63,581 | |
Less accumulated depreciation | (42,761) | (40,706) | |
Property, equipment, and software, net | 23,791 | 22,875 | |
Depreciation expense | 2,100 | $ 1,800 | |
Furniture and fixtures | |||
Property, Plant and Equipment [Line Items] | |||
Property, equipment and software, gross | 2,795 | 2,795 | |
Equipment | |||
Property, Plant and Equipment [Line Items] | |||
Property, equipment and software, gross | 11,442 | 10,216 | |
Computer software | |||
Property, Plant and Equipment [Line Items] | |||
Property, equipment and software, gross | 46,065 | 44,320 | |
Leasehold improvements | |||
Property, Plant and Equipment [Line Items] | |||
Property, equipment and software, gross | $ 6,250 | $ 6,250 |
ACCOUNTS PAYABLE AND ACCRUED _3
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Accounts Payable [Abstract] | ||
Accrued card network fees | $ 8,160 | $ 8,041 |
DEBT OBLIGATIONS - Schedule of
DEBT OBLIGATIONS - Schedule of Long-Term Debt (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2021 | Dec. 31, 2020 | Mar. 31, 2020 | |
Debt Instrument [Line Items] | |||
Total debt obligations | $ 379,104,000 | $ 382,040,000 | |
Less: current portion of long-term debt | (24,302,000) | (19,442,000) | |
Less: unamortized debt discounts and deferred financing costs | (4,135,000) | (4,725,000) | |
Long-term debt, net | 350,667,000 | $ 357,873,000 | |
Senior Credit Agreement | Line of Credit | Revolving Credit Facility | |||
Debt Instrument [Line Items] | |||
Total debt obligations | $ 0 | ||
Less: unamortized debt discounts and deferred financing costs | $ (2,700,000) | ||
Interest rate during period | 6.65% | 6.65% | |
Maximum borrowing capacity | $ 25,000,000 | ||
Senior Credit Agreement | Line of Credit | Revolving Credit Facility | LIBOR | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate | 6.50% | 6.50% | |
Term Loan Agreement | Line of Credit | |||
Debt Instrument [Line Items] | |||
Interest rate during period | 12.50% | 12.50% | |
Term Loan Agreement | Line of Credit | Payment-in-Kind Interest Rate | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate | 5.00% | 5.00% | |
Senior Term Loan, Maturing January 3, 2023 | Senior Notes | |||
Debt Instrument [Line Items] | |||
Total debt obligations | $ 274,600,000 | $ 279,400,000 | |
Senior Term Loan, Maturing January 3, 2023 | Senior Credit Agreement | Senior Notes | |||
Debt Instrument [Line Items] | |||
Total debt obligations | $ 274,557,000 | $ 279,417,000 | |
Interest rate during period | 7.50% | 7.50% | |
Debt instrument, interest rate, LIBOR floor | 1.00% | 1.00% | |
Senior Term Loan, Maturing January 3, 2023 | Senior Credit Agreement | Senior Notes | LIBOR | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate | 6.50% | 6.50% | |
Senior Term Loan, Maturing January 3, 2023 | Senior Credit Agreement | Line of Credit | Revolving Credit Facility | |||
Debt Instrument [Line Items] | |||
Total debt obligations | $ 0 | $ 0 | |
Maximum borrowing capacity | 25,000,000 | ||
Subordinated Term Loan, Maturing July 3, 2023 | Term Loan Agreement | Subordinated Debt | |||
Debt Instrument [Line Items] | |||
Total debt obligations | $ 104,547,000 | $ 102,623,000 |
DEBT OBLIGATIONS - Narrative (D
DEBT OBLIGATIONS - Narrative (Details) - USD ($) | Mar. 18, 2020 | Sep. 30, 2020 | Mar. 31, 2021 | Sep. 30, 2020 | Mar. 31, 2020 | Mar. 18, 2022 | Dec. 31, 2020 |
Debt Instrument [Line Items] | |||||||
Payment-in-kind interest | $ 1,924,000 | $ 1,391,000 | |||||
Interest expense | 9,168,000 | 10,315,000 | |||||
Amortization of debt discount (premium) and debt issuance costs | 600,000 | 500,000 | |||||
Deferred lender fees | $ 4,135,000 | $ 4,725,000 | |||||
Debt covenant, maximum net leverage ratio | 771.00% | ||||||
Term Loan Agreement | |||||||
Debt Instrument [Line Items] | |||||||
Borrowings outstanding under revolving credit facility | $ 80,000,000 | ||||||
Interest payable | 24,500,000 | $ 22,600,000 | |||||
Payment-in-kind interest | $ 1,900,000 | 1,400,000 | |||||
Line of Credit | Term Loan Agreement | |||||||
Debt Instrument [Line Items] | |||||||
Debt instrument, interest rate, effective percentage | 5.00% | ||||||
Line of Credit | Term Loan Agreement | Scenario, Forecast | |||||||
Debt Instrument [Line Items] | |||||||
Line of credit faciity, penalty percentage | 2.00% | ||||||
Line of Credit | Term Loan Agreement | Applicable Margin | |||||||
Debt Instrument [Line Items] | |||||||
Applicable margin | 5.00% | ||||||
Line of Credit | Senior Credit Agreement | |||||||
Debt Instrument [Line Items] | |||||||
Debt prepayment | $ 106,500,000 | ||||||
Unamortized loan costs and discount expensed | $ 1,500,000 | ||||||
Line of Credit | Senior Credit Agreement | Revolving Credit Facility | |||||||
Debt Instrument [Line Items] | |||||||
Maximum borrowing capacity | $ 25,000,000 | ||||||
Unused commitment fee percentage | 0.50% | ||||||
Line of credit faciity, penalty percentage | 1.00% | ||||||
Deferred lender fees | 2,700,000 | ||||||
Expensed costs | $ 400,000 | ||||||
Line of Credit | Senior Credit Agreement | Revolving Credit Facility | Senior Term Loan, Maturing January 3, 2023 | |||||||
Debt Instrument [Line Items] | |||||||
Maximum borrowing capacity | $ 25,000,000 | ||||||
Line of Credit | Senior Credit Agreement | Minimum | |||||||
Debt Instrument [Line Items] | |||||||
Debt instrument, interest rate, LIBOR floor | 1.00% |
DEBT OBLIGATIONS - Rolling Matu
DEBT OBLIGATIONS - Rolling Maturities of Long-Term Debt (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Debt Instrument [Line Items] | ||
2022 (current) | $ 24,302 | |
2023 | 250,255 | |
2024 | 104,547 | |
Total debt obligations | 379,104 | $ 382,040 |
Line of Credit | Senior Credit Agreement | Term Loan | ||
Debt Instrument [Line Items] | ||
2022 (current) | 24,302 | |
2023 | 250,255 | |
2024 | 0 | |
Total debt obligations | 274,557 | |
Line of Credit | Senior Credit Agreement | Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
2022 (current) | 0 | |
2023 | 0 | |
2024 | 0 | |
Total debt obligations | 0 | |
Line of Credit | Term Loan Agreement | Term Loan | ||
Debt Instrument [Line Items] | ||
2022 (current) | 0 | |
2023 | 0 | |
2024 | 104,547 | |
Total debt obligations | $ 104,547 |
INCOME TAXES (Details)
INCOME TAXES (Details) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | ||
Effective income tax rate | 45.40% | 17.40% |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Millions | Mar. 15, 2019 | Mar. 31, 2021 |
Commitments and Contingencies Disclosure [Abstract] | ||
Purchase obligation, current year | $ 14.8 | |
Purchase obligation year one | 7.8 | |
Purchase obligation, year two | 7.8 | |
Asset acquisition | $ 15.2 | |
Contingent cash payments for asset acquisitions | $ 6.4 | 2.1 |
Asset acquisition, contingent consideration | $ 4.3 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) $ in Thousands | Jan. 31, 2019 | Feb. 28, 2019 | Mar. 31, 2020 | Dec. 31, 2020 | Mar. 31, 2021 | May 22, 2019 |
Related Party Transactions [Abstract] | ||||||
Notes receivable, noncurrent | $ 3,500 | $ 3,500 | ||||
Notes receivable, maximum loan commitment available for future issuance, noncurrent | $ 10,000 | |||||
Notes receivable, noncurrent, annual interest rate | 12.00% | |||||
Related Party Transaction [Line Items] | ||||||
Redeemable noncontrolling interest, equity, preferred, redemption value | $ 4,500 | |||||
Preferred yield per year | 6.00% | |||||
Preferred stock, percentage owned | 83.30% | |||||
Income (loss) from equity method investments | $ 200 | |||||
Priority Hospitality Technology, LLC | ||||||
Related Party Transaction [Line Items] | ||||||
Net income attributable to non-controlling interests | $ 250 | |||||
Chief Executive Officer And Chairman | ||||||
Related Party Transaction [Line Items] | ||||||
Percentage of ownership before transaction | 80.00% |
RECONCILIATION OF STOCKHOLDER_3
RECONCILIATION OF STOCKHOLDERS' DEFICIT AND NON-CONTROLLING INTERESTS - Narrative (Details) - shares | Mar. 31, 2021 | Dec. 31, 2020 |
Equity [Abstract] | ||
Preferred stock authorized (in shares) | 100,000,000 | 100,000,000 |
RECONCILIATION OF STOCKHOLDER_4
RECONCILIATION OF STOCKHOLDERS' DEFICIT AND NON-CONTROLLING INTERESTS - Equity Reconciliation (Details) - USD ($) shares in Thousands | 3 Months Ended | 9 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | Sep. 30, 2020 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||
Beginning balance | $ (98,564,000) | ||
Liability-classified stock-based compensation converted to equity-classified | 300,000 | ||
Net loss | (2,679,000) | $ (5,869,000) | |
Proceeds from exercise of stock options | 617,000 | ||
Ending balance | $ (99,755,000) | ||
Priority Real Estate Technology LLC (PRET) | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||
Gain on sale of business attributable to noncontrolling interest | $ 45,100,000 | ||
Preferred Stock | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||
Beginning balance (in shares) | 0 | 0 | 0 |
Beginning balance | $ 0 | $ 0 | $ 0 |
Ending balance (in shares) | 0 | 0 | |
Ending balance | $ 0 | $ 0 | |
Common Stock | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||
Beginning balance (in shares) | 67,391 | 67,061 | 67,061 |
Beginning balance | $ 68,000 | $ 68,000 | $ 68,000 |
Vesting of stock-based compensation (in shares) | 159 | ||
Proceeds from exercise of stock options (in shares) | 90 | ||
Ending balance (in shares) | 67,640 | 67,061 | |
Ending balance | $ 68,000 | $ 68,000 | |
Treasury Stock | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||
Beginning balance (in shares) | 451 | 451 | 451 |
Beginning balance | $ (2,388,000) | $ (2,388,000) | $ (2,388,000) |
Ending balance (in shares) | 451 | 451 | |
Ending balance | $ (2,388,000) | $ (2,388,000) | |
Additional Paid-In Capital | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||
Beginning balance | 5,769,000 | 3,651,000 | 3,651,000 |
Equity-classified stock-based compensation | 558,000 | 338,000 | |
Liability-classified stock-based compensation converted to equity-classified | 313,000 | ||
Proceeds from exercise of stock options | 617,000 | ||
Ending balance | 7,257,000 | 3,989,000 | |
Accumulated (Deficit) | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||
Beginning balance | (102,013,000) | (127,674,000) | (127,674,000) |
Net loss | (2,679,000) | (5,869,000) | |
Ending balance | (104,692,000) | (133,543,000) | |
Total Priority Technology Holdings, Inc. Stockholders' (Deficit) | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||
Beginning balance | (98,564,000) | (126,343,000) | (126,343,000) |
Equity-classified stock-based compensation | 558,000 | 338,000 | |
Liability-classified stock-based compensation converted to equity-classified | 313,000 | ||
Net loss | (2,679,000) | (5,869,000) | |
Ending balance | $ (99,755,000) | (131,874,000) | |
NCI | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||
Beginning balance | 5,654,000 | $ 5,654,000 | |
Ending balance | 5,654,000 | ||
NCI | Priority Real Estate Technology LLC (PRET) | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||
Ending balance | $ 5,654,000,000 |
STOCK-BASED COMPENSATION (Detai
STOCK-BASED COMPENSATION (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Equity-classified and liability-classified stock-based compensation | $ 558 | $ 338 |
Liability-classified stock-based compensation converted to equity-classified | 300 | |
Total Priority Technology Holdings, Inc. Stockholders' (Deficit) | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Liability-classified stock-based compensation converted to equity-classified | 313 | |
2018 Equity Incentive Plan | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Equity-classified and liability-classified stock-based compensation | $ 600 | $ 300 |
FAIR VALUE (Details)
FAIR VALUE (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Notes receivable, fair value | $ 6,900 | $ 7,700 |
Long-term debt | 379,104 | 382,040 |
Senior Notes | Senior Term Loan, Maturing January 3, 2023 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt fair value | 275,200 | 278,000 |
Long-term debt | $ 274,600 | $ 279,400 |
SEGMENT INFORMATION - Narrative
SEGMENT INFORMATION - Narrative (Details) $ in Millions | Sep. 22, 2020USD ($) | Mar. 31, 2021USD ($)segment | Mar. 31, 2020USD ($) |
Segment Reporting Information [Line Items] | |||
Number of reportable segments | segment | 3 | ||
Disposal Group, Disposed of by Sale, Not Discontinued Operations | RentPayment | |||
Segment Reporting Information [Line Items] | |||
Distribution attributable to parent | $ 51.4 | ||
Distribution attributable to non-controlling interests | $ 45.1 | ||
Additional distributions to non-controlling interests | $ 0.5 | ||
Disposal group revenues | $ 3.8 | ||
Income from operations of disposal group | $ 0.6 | ||
Commercial Payments | |||
Segment Reporting Information [Line Items] | |||
Number of reportable segments | segment | 1 | ||
Consumer Payments | Revenue from Contract with Customer Benchmark | Customer Concentration Risk | |||
Segment Reporting Information [Line Items] | |||
Concentration risk (as a percent) | 23.30% | 20.10% |
SEGMENT INFORMATION - Schedule
SEGMENT INFORMATION - Schedule of Segment Reporting Information by Segment (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Revenues: | ||
Revenues | $ 113,297 | $ 96,933 |
Income (loss) from operations: | ||
Total income from operations of reportable segments | 4,527 | 3,559 |
Depreciation and amortization: | ||
Depreciation and amortization | 9,070 | 10,272 |
Operating Segments | ||
Revenues: | ||
Revenues | 113,297 | 96,933 |
Income (loss) from operations: | ||
Total income from operations of reportable segments | 13,046 | 8,284 |
Operating Segments | Consumer Payments | ||
Revenues: | ||
Revenues | 108,393 | 86,031 |
Income (loss) from operations: | ||
Total income from operations of reportable segments | 13,363 | 7,152 |
Depreciation and amortization: | ||
Depreciation and amortization | 8,579 | 8,583 |
Operating Segments | Commercial Payments | ||
Revenues: | ||
Revenues | 3,500 | 6,368 |
Income (loss) from operations: | ||
Total income from operations of reportable segments | (409) | 764 |
Depreciation and amortization: | ||
Depreciation and amortization | 74 | 76 |
Operating Segments | Integrated Partners | ||
Revenues: | ||
Revenues | 1,404 | 4,534 |
Income (loss) from operations: | ||
Total income from operations of reportable segments | 92 | 368 |
Depreciation and amortization: | ||
Depreciation and amortization | 129 | 1,311 |
Corporate | ||
Income (loss) from operations: | ||
Total income from operations of reportable segments | (8,519) | (4,725) |
Depreciation and amortization: | ||
Depreciation and amortization | $ 288 | $ 302 |
SEGMENT INFORMATION - Schedul_2
SEGMENT INFORMATION - Schedule of Reconciliation of Total Operating Income (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Segment Reporting Information [Line Items] | ||
Total income from operations of reportable segments | $ 4,527 | $ 3,559 |
Interest expense | (9,168) | (10,315) |
Other expenses, net | (269) | (346) |
Income tax benefit | 2,231 | 1,233 |
Net loss | (2,679) | (5,869) |
Operating Segments | ||
Segment Reporting Information [Line Items] | ||
Total income from operations of reportable segments | 13,046 | 8,284 |
Corporate | ||
Segment Reporting Information [Line Items] | ||
Total income from operations of reportable segments | $ (8,519) | $ (4,725) |
LOSS PER COMMON SHARE - Schedul
LOSS PER COMMON SHARE - Schedule of Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Earnings Per Share [Abstract] | ||
Net loss | $ (2,679) | $ (5,869) |
Less: Income attributable to non-controlling interests | 0 | 0 |
Net loss attributable to common shareholders | $ (2,679) | $ (5,869) |
Weighted-average common shares for fully-diluted earnings (loss) per share (in shares) | 67,543 | 67,061 |
Basic and Diluted Loss Per Common Share (USD per share) | $ (0.04) | $ (0.09) |
LOSS PER COMMON SHARE - Sched_2
LOSS PER COMMON SHARE - Schedule of Antidilutive Securities (Details) - shares shares in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive securities that were excluded from EPS (in shares) | 6,392 | 6,195 |
Outstanding warrants on common stock | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive securities that were excluded from EPS (in shares) | 3,556 | 3,556 |
Outstanding options and warrants issued to advisor | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive securities that were excluded from EPS (in shares) | 600 | 600 |
Restricted stock unit awards | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive securities that were excluded from EPS (in shares) | 842 | 395 |
Outstanding stock options awards | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive securities that were excluded from EPS (in shares) | 1,394 | 1,644 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - USD ($) | Apr. 28, 2021 | Apr. 27, 2021 | Mar. 05, 2021 | Mar. 31, 2021 | Mar. 30, 2021 | Dec. 31, 2020 |
Subsequent Event [Line Items] | ||||||
Common stock par value (USD per share) | $ 0.001 | $ 0.001 | ||||
Preferred stock par value (USD per share) | $ 0.001 | $ 0.001 | ||||
Finxera Holdings Inc Merger | ||||||
Subsequent Event [Line Items] | ||||||
Shares converted | 1 | |||||
Payments to acquire business | $ 425,000,000 | |||||
Business combination, percent of earnings to reduce consideration | 25.00% | |||||
Prime Warrior Acquisition Corp. | ||||||
Subsequent Event [Line Items] | ||||||
Common stock par value (USD per share) | $ 0.01 | |||||
Finxera | ||||||
Subsequent Event [Line Items] | ||||||
Common stock par value (USD per share) | $ 0.01 | |||||
Subsequent Event | ||||||
Subsequent Event [Line Items] | ||||||
Common stock par value (USD per share) | $ 0.001 | |||||
Warrants and rights, number of shares allowed to purchase (in shares) | 1,803,841 | |||||
Exercise price (USD per share) | $ 0.001 | |||||
Subsequent Event | Certain Residual Portfolio Rights | ||||||
Subsequent Event [Line Items] | ||||||
Total consideration transferred in asset acquisition | $ 42,400,000 | |||||
Note payable netted against purchase price | 5,000,000 | |||||
Payments for asset acquisition | $ 37,400,000 | |||||
Subsequent Event | Credit Agreement | ||||||
Subsequent Event [Line Items] | ||||||
Maximum borrowing capacity | $ 630,000,000 | |||||
Incremental prepayment penalty (as a percent) | 1.00% | |||||
Subsequent Event | Line of Credit | ||||||
Subsequent Event [Line Items] | ||||||
Maximum percentage of credit outstanding (as a percent) | 35.00% | |||||
Total net leverage ratio, year one | 6.50 | |||||
Total net leverage ratio, year two | 6 | |||||
Total net leverage ratio, year three | 5.50 | |||||
Subsequent Event | Line of Credit | Senior Secured Revolving Credit Facility | Revolving Credit Facility | ||||||
Subsequent Event [Line Items] | ||||||
Maximum borrowing capacity | $ 40,000,000 | |||||
Subsequent Event | Medium-term Notes | Initial Term Loan | ||||||
Subsequent Event [Line Items] | ||||||
Maximum borrowing capacity | 300,000,000 | |||||
Subsequent Event | Medium-term Notes | Delayed Draw Term Loan | ||||||
Subsequent Event [Line Items] | ||||||
Maximum borrowing capacity | $ 290,000,000 | |||||
Subsequent Event | Purchase Agreement | ||||||
Subsequent Event [Line Items] | ||||||
Number of shares issued in transaction (in shares) | 150,000 | |||||
Preferred stock par value (USD per share) | $ 0.001 | |||||
Purchase price | $ 150,000,000 | |||||
Purchase price per transactions | $ 1,000 | |||||
Sale of stock, additional shares, period one | 50,000 | |||||
Maximum purchase price | $ 50,000,000 | |||||
Purchase price per preferred share (USD per share) | $ 1,000 | |||||
Sale of stock, additional shares, period two | 50,000 | |||||
Purchased price per preferred share, period two (USD per share) | $ 1,000 | |||||
Period of agreement (in months) | 18 months |